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On December 22, 2021, the European Commission published a draft Directive (link) to prevent the misuse of shell entities for improper tax purposes (hereafter referred to as “ATAD3”). ATAD3 should ensure that entities within the EU that have no or minimal economic activity (so-called “shell entities”) are unable to benefit from certain tax advantages as per the EU and national tax treaties. 

The EU Member States will need to implement the proposed measures into their domestic tax legislation by June 30, 2023, and apply them by January 1, 2024. To determine if a company falls within the scope of the Directive, a 2-year look-back rule shall be applied. Therefore, as of January 1, 2022, the company’s position may already be a reference point, and entities may want to consider appropriate actions on a current basis. 

In scope are entities residing in the EU, predominantly generate passive income and/or predominantly hold real estate, operate cross border, and have engaged third-party service providers to act as external directors for their EU tax-resident companies will be impacted by these new rules.  

After our successful DAC6pro tool, we consider building a second tax regtech tool that eases and audit trails the assessment whether an entity is in scope and to relieve the reporting burden. Interested? Please download our ATAD3 flow chart via the button below and subscribe here if you are interested in becoming an early bird user of our upcoming ATAD3pro tool.