European Commission’s Proposal for a Council Directive on Shell Entities: further enhancement of the aggressive tax planning toolbox?
On 22 December 2021, the European Commission released a proposal for a Council Directive laying down rules to prevent the misuse of shell entities for tax purposes. The initiative was triggered by the impression on the part of the Commission that entities set up in the EU with no or only minimal substance, performing no or very little economic activity, continue to pose a risk of being used for aggressive tax planning structures.
Substance was always an important topic in international taxation when entities perform cross-border investment and business activities. However, the awareness about substance has only increased throughout the OECD Base Erosion and Profit Shifting (“BEPS”) Project that focused on substance and transparency as two central topics.
The OECD BEPS Project had a significant impact on the international tax landscape. In the EU, two EU Anti-tax Avoidance Directives (“ATAD” and “ATAD 2”) have been adopted that required EU Member States to implement a number of anti-abuse provisions. Moreover, bilateral tax treaties have been modified through the multilateral instrument (“MLI”) with a view to implement various anti-abuse provisions such as the principal purposes test. In addition, in order to increase transparency, a series of directives on administrative cooperation, the “DAC” series, were put in place. The latest, DAC 6 requires reporting of potentially aggressive transactions in corporate tax matters.
Hence, the tax authorities of EU Member States have already a comprehensive arsenal of anti-abuse rules that allow them to tackle abusive situations and an efficient cooperation framework that should allow them to be aware of any residual tax avoidance or aggressive tax planning arrangements. In this respect, the questions arise if the objectives pursued by the proposed Directive of counteracting tax avoidance and addressing tax evasion // that aims at drawing the line between abusive and legitimate structures // could be achieved by elevating existing substance requirements for EU entities to a higher level and whether and how the mechanisms suggested therein could affect Luxembourg as a major fund location and a global hub for cross-border investment and business activities.
This conference aims at providing participants with a clear overview of the proposed reporting regime for shell entities. A presentation will be followed by a panel discussion during which Luxembourg officials and professionals from different areas will debate the proposed Directive. The focus of the conference will be on Alternative Investments (Private Equity, Real Estate, Infrastructure, etc.) and multinational groups in Luxembourg.
3:30 PM – 4:00 PM: Registration
4:00 PM – 5:00 PM: The proposed reporting regime for shell entities
- Necessity and legal basis of the proposed Directive
o Substance in international taxation
o Existing anti-abuse and reporting obligations
o Considering the legal basis of this initiative
- Analysing the proposed reporting regime
o Determination of shell entities (a series of tests)
o Tax treatment of shell entities
o Exchange of information
o Requests for tax audits
- How to manage (reporting) obligations in practice
- Practical case study
Oliver R. Hoor, Tax Partner, ATOZ Tax Advisers
Discussing the proposed
reporting regime and its possible effects on Luxembourg
• Jean SCHAFFNER, Avocat, Head of Tax Department, ALLEN & OVERY
• Alain STEICHEN, Managing Partner, BSP
Co-editors in chief of the Revue de droit fiscal
• Flora CASTELLANI, Conseillère de direction Fiscalité, UNION DES ENTREPRISES LUXEMBOURGEOISES
• Katarina KÖSZEGHY, Conseillère, Représentation permanente du Luxembourg auprès de l’Union européenne (équipe ECOFIN)
5:55 PM – 6 PM: Closing remarks