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PwC responds to the EU Commission public consultation on shell entities

06 September, 2021

As part of the EU Commission's Communication on Business Taxation for the 21st century (see our previous release), the Commission proposed to take action to table a legislative proposal setting out union rules to neutralise the misuse of shell entities for tax purposes. This measure will be actionable by Q4 2021.

Although the EC notes that there can be valid reasons for the use of such "shell" companies, they believe that there is a need for further action to tackle misuse and abuse of existing rules that leads to tax avoidance. A new legislative initiative is proposed to be introduced to neutralise the misuse of shell entities (with no or minimal substance and which exist for tax purposes only). The proposed measure would include requiring companies to report to the tax authorities information to enable the tax authority to assess whether there is real and substantial presence and economic activity. Tax benefits may be denied where abusive shell companies are found to exist. Improved information exchange, monitoring and transparency would be required to facilitate such investigations.

In responding to a public consultation which the EC initiated on this measure, PwC refers to two broad themes:

  1. Entities and arrangements are generally set up for a non-tax reasons, and
  2. The European Commission should take stock of the entities and arrangements in use and whether there are specific instances of abuse of the rules that result in tax avoidance. If there is an existing rule that tackles this abuse that should be enforced, and only if there is not, should the Commission consider further rule-making.

If you would like to know more, feel free to contact us today.

A photo of the EU Commission in Brussels with three EU flags in the foreground and a bright sunset in the background.

Contact us

Denis Harrington

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 8629

Peter Reilly

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 6644

Tiiu Albin

Senior Manager, PwC Ireland (Republic of)

Tel: +353 1 792 8063

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