EU Directive aimed at Curbing the Misuse of Shell Entities for Tax Purposes

On 18 May 2021, the European commission implemented the Communication on Business Taxation for the 21st Century with the aim to promote a tax system which is more efficient, robust and fair, within the European Union.

This also lays down a long-term as well as a short term plan for Europe’s recovery following the pandemic so as to make sure there are the right levels of public revenues in the coming years. The introduction of both the anti-tax avoidance directive (ATAD) as well as the directive on administrative cooperation (DAC) has resulted in significant improvement vis-à-vis this area, however companies with no or minimal substance in a jurisdiction continue to create a problem from a tax perspective when these are misused.

The proposed council directive laying down rules to prevent the misuse of shell entities for tax purposes and amending Directive 2011/16/EU aims to tackle this, by trying to eliminate what colloquially were referred to as “letter box” companies. The directive would apply to all entities, irrespective of size, that are considered tax residents in any of the EU Member and it will be applicable with effect from 1 January 2024.

Should you wish to read more about this directive, we invite you to download the document hereunder.


Curbing the misuse of shell entities for tax purposes