European Commission - updates on initiatives to address tax challenges due to non-EU shell entities

The European Commission (EC) on January 31st, 2023, published the Factual Summary Report regarding the public consultation on their “Tax evasion & aggressive tax planning in the EU – tackling the role of enablers” initiative.

The initiative is a follow-up on the draft of the COUNCIL DIRECTIVE laying down rules to prevent the misuse of shell entities for tax purposes and amending Directive 2011/16/EU (“Unshell proposal”).

The Unshell proposal aims to identify "undertakings and legal arrangements that can be considered or considered to be a tax resident within the EU, and which are presumably engaged with economic activity but that do not conduct any economic activities” and shall after the transition into domestic law into force on January 1, 2024.

The initiative addresses challenges on non-EU shell entities and has the goal to prohibit enablers who design, market and/or assist in the creation of tax arrangements or schemes in non-EU countries that lead to tax evasion or aggressive tax planning for the EU Member States.

The initiative shall interact with existing regulations to combat cross-border tax evasion.