New developments in the drafting of the Unshell Directive (ATAD III): EU is setting minimum requirements for the tax advantages of shell companies
Title: New developments in the drafting of the Unshell Directive (ATAD III): EU is setting minimum requirements for the tax advantages of shell companies
Jurisdiction: European union
Authors: Mikko Alakare and Anette Laitinen
Law firm: Castrén & Snellman
On 17 January 2023, the European Parliament approved a draft of the directive that is meant to prevent tax avoidance and tax evasion through companies that do not fulfil the minimum substance requirements set out in the directive (‘ATAD III’ or ‘Unshell Directive’). The draft directive is next referred to the Council, and it is to enter into force from the beginning of 2024.
The purpose of the Unshell Directive is to impose minimum substance requirements that companies located in the EU must fulfil in order to be entitled to the tax advantages granted through tax treaties and EU directives. The directive aims to prevent tax avoidance and tax evasion practices that directly affect the functioning of the EU’s internal market. The regulation is meant to prevent situations where companies that are located in the EU but have no or minimal economic activity (i.e., holding companies or shell companies) can benefit from tax advantages particularly by eroding the tax base of another Member State.