Taxation: rules to prevent the misuse of shell entities for tax purposes

It affects companies and legal arrangements tax-resident in EU Member States, especially passive-income, cross-border holding, financing, leasing, property, and intellectual-property structures with limited staff or premises.

• Requires at-risk undertakings to report premises, bank account, directors or employees in annual tax returns.
• Presumes lack of substance if required indicators or supporting evidence are missing, with rebuttal rights.
• Denies treaty and EU directive tax benefits for unrebutted shell undertakings lacking minimum substance.
• Requires automatic information exchange and penalties of at least 5% of annual turnover for reporting breaches.

Takes effect

The Directive enters into force on the twentieth day following publication in the Official Journal and applies from 1 January 2024.

Transitional law

Member States must transpose the Directive by 30 June 2023 before applying the rules from 1 January 2024.

• Directive 2011/16/EU (32011L0016)
  • art. 3(9): amends definition of automatic exchange; replaces points (a) and (c)
  • art. 8ad: inserts new Article 8ad on automatic exchange of information on minimum-substance reporting undertakings
  • art. 20(5): replaces paragraph on Commission standard forms for automatic exchanges
  • art. 21(5): replaces paragraph on secure central directories for administrative cooperation information exchanges