ATAD 3, known as the EU Unshell Directive, is expected to come into force on 1 January 2024 with a look-back effect of two years.
This Directive targets EU tax resident entities that are engaged in cross-border economic activities (including holding companies) but have little or no economic substance, and may thus be misused for tax purposes.
Affected companies (based on a set of rules and criteria) that do not have sufficient local substance as per the relevant Directive indicators, shall be presumed not to have minimum economic substance and will in principle qualify as ‘shell’ entities. Such entities would be reported to other relevant EU Jurisdictions and could face a number of tax consequences (e.g. no issuance of a tax residency certificate, non-application of relevant double tax treaties and EU Directives, be considered as ‘look-through’ entities by another EU jurisdiction).
Therefore, international corporate structures, including the use of holding companies, should start considering whether they may potentially fall within the scope of the Directive and, if so, to consider appropriate actions.
More details regarding the Directive can be found on our Information Sheet by clicking here.