- In 2021, the EC proposed a directive targeting the use of 'shell' entities for tax purposes in the EU. This may be relevant for some UK groups with presence in the EU.
- Based on the original proposal, EU companies that did not meet prescribed minimum substance requirements would be unable to benefit from double tax treaties as well as EU Parent-Subsidiary and Interest and Royalties directives. Information on entities in scope would be exchanged automatically between EU member states’ tax authorities.
- Following substantial disagreements among member states on the required minimum substance and the consequences of being deemed a ‘shell’, in June 2024, the Commission attempted to relaunch discussions with a new compromise proposal which was limited to information exchange, leaving tax consequences at the discretion of member states.
- Timing: the schedule for adoption remains unclear due to disagreements among member states. The programme of the Polish presidency of the EU Council does not include progressing Unshell.
Resources (click to open)
- Texts adopted - Rules to prevent the misuse of shell entities for tax purposes (europa.eu) (January 2023)
- Draft report of the Committee on Economic and Monetary Affairs on the Unshell proposal (May 2022)
- EU Commission proposes directive to prevent misuse of shell entities in the EU (Deloitte tax@hand, December 2021)
