Anyone planning on setting up or with existing structures in EU should be aware of the Unshell directive.
taxation-customs.ec.europa.eu
Its important to note that unshell has 2 year look-back period.
Now about the recent developments:
Because EU member states reached a deadlock on the draft directive on the misuse of shell entities (Unshell) in September, the EU Council’s Spanish presidency has suggested the exchange of information as a first step.
A two-step approach based on the exchange of information on shell entities “may be a reasonable landing point, considering the diverging views of the delegations” on the Unshell proposal, the Spanish presidency said in a note prepared for an October 4 meeting of the high-level working party on tax questions, a group of high-level representatives designated by member states.
In December 2021 the European Commission proposed both substance criteria and tax consequences for shell companies. After 20 months of negotiations, including a September 5 meeting, it appears that an agreement on the directive as it is laid out in the latest compromise proposal is unlikely, the council presidency said. It will ask EU countries' officials October 4 if they would support a two-stage approach involving the exchange of information about shell companies and about member states’ best practices regarding shell companies, or if more technical work should be done on the existing compromise proposal to try to reach the required unanimity.
At a meeting in April, some member states indicated that they wanted stronger substance criteria while others wanted to make the criteria less stringent. The Czech council presidency considered the compromise proposal well-balanced and didn’t propose any changes. However, during the September 5 meeting of the regular working party on tax questions, "one delegation raised concerns about the robustness of these criteria and their possible spillover effects, i.e. the likelihood of these criteria becoming a safe harbor so that any other antiabuse rule would not be applicable if an entity fulfills those criteria, as the entity would be presumed to have substance for all purposes,” the council presidency's note says. Germany reportedly is the country that expressed concern about the substance criteria.
After the September 5 meeting, Germany told that it supports “measures that are based on robust criteria of substance in line with internationally accepted standards and the jurisprudence of the European Court of Justice that also require EU member states to effectively prevent an abuse of rights.”
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Unshell
The Unshell proposal should ensure that entities in the European Union that have no or minimal economic activity are unable to benefit from any tax advantages and do not place any financial burden on taxpayers.
Now about the recent developments:
Because EU member states reached a deadlock on the draft directive on the misuse of shell entities (Unshell) in September, the EU Council’s Spanish presidency has suggested the exchange of information as a first step.
A two-step approach based on the exchange of information on shell entities “may be a reasonable landing point, considering the diverging views of the delegations” on the Unshell proposal, the Spanish presidency said in a note prepared for an October 4 meeting of the high-level working party on tax questions, a group of high-level representatives designated by member states.
In December 2021 the European Commission proposed both substance criteria and tax consequences for shell companies. After 20 months of negotiations, including a September 5 meeting, it appears that an agreement on the directive as it is laid out in the latest compromise proposal is unlikely, the council presidency said. It will ask EU countries' officials October 4 if they would support a two-stage approach involving the exchange of information about shell companies and about member states’ best practices regarding shell companies, or if more technical work should be done on the existing compromise proposal to try to reach the required unanimity.
At a meeting in April, some member states indicated that they wanted stronger substance criteria while others wanted to make the criteria less stringent. The Czech council presidency considered the compromise proposal well-balanced and didn’t propose any changes. However, during the September 5 meeting of the regular working party on tax questions, "one delegation raised concerns about the robustness of these criteria and their possible spillover effects, i.e. the likelihood of these criteria becoming a safe harbor so that any other antiabuse rule would not be applicable if an entity fulfills those criteria, as the entity would be presumed to have substance for all purposes,” the council presidency's note says. Germany reportedly is the country that expressed concern about the substance criteria.
After the September 5 meeting, Germany told that it supports “measures that are based on robust criteria of substance in line with internationally accepted standards and the jurisprudence of the European Court of Justice that also require EU member states to effectively prevent an abuse of rights.”
Read More:
EU Council Presidency Suggests a Two-Step Approach on Unshell | Tax Notes
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