According to ATAD3, high risk companies (the reporting undertaking), that may become shell companies, are those that derive more than 75 percent of their revenue from interest, royalties, dividends, and financial income; gain more than 60 percent of their book value or “relevant income” from cross-border transactions; and have outsourced the administration of day-to-day operations and decision-making on significant.
These companies would be asked to provide additional information in their annual tax declarations which are seen by the EC as necessary to determine the minimum substance for tax purposes, i.e., to decide whether or not these companies are “shell”. Listed companies, entities with at least five full-time employees, and undertakings located in the same member states as their parent companies would be exempt from this reporting requirement.
By 6 April 2022, the EC received many public comments from businesses, tax advisers and academia. The vast majority of them indicates that the EC fails to understand how businesses conduct their activities insofar as ATAD3’ criteria to identify entities that lack economic substance and are misused for tax purposes are too stringent functions.
During a one day conference “Impact of the ATAD 3 (proposal) on EU and International Tax and Investment Law” organized by IFA Poland, whose partner is MDDP, prominent international tax scholars and practitioners will depict the background of the ATAD 3 and thoroughly analyse wide ranging consequences arising from classification as a shell entity.