Update on the ATAD 3 ‘Unshell’ Directive: European Parliament approves draft Unshell Directive

Last year, the ALG Tax team published an article in relation to the European Commission's proposed Unshell Directive, which has the stated aim of preventing the misuse of shell entities for tax purposes. The Unshell Directive could potentially impact a wide variety of Irish entities, including holding companies, section 110 securitisation companies and entities forming part of multinational groups which, if they do not satisfy certain substance requirements, will result in them being subjected to additional reporting requirements.

A follow-up article was published in July 2022 in relation to a number of proposed amendments to the Unshell Directive, which were recommended by a draft report published by the European Parliament.

In January 2023, the European Parliament's final report was published and the European Parliament voted to approve the amendments proposed in the final report.

In this publication, we will examine the amendments to the draft Unshell Directive as recommended by the European Parliament.

Under the current draft proposals, penalties for failure to comply could range from denial of tax treaty benefits to being subject to penalties of at least 2% of annual revenue on a failure to report or of at least 4% of annual revenue in the event of a false declaration being made.

It is important to note that while the European Parliament's amendments to the draft Unshell Directive will be considered by the Council of the European Union, the Council is not bound to accept these changes and ultimately the final text will require the unanimous support of the representatives of all Member States.

Go to publication. 

For more information on this topic, please contact James Somerville (Partner) or any member of A&L Goodbody’s Tax Department.

This insight was prepared with assistance by Darragh Noone (Senior Associate) and Cian Ryan (Solicitor).

Published: 3 February 2023