On Wednesday 22 March, Member State experts discussed the latest compromise proposal on the proposed ‘UNSHELL’ directive which sets out rules to prevent shell companies being misused for tax purposes.
According to a European source, one of the issues discussed was the exchange of information. At previous meetings of the working party, delegations had expressed strong support for the automatic exchange of information, which for some Member States would be a sufficient tax consequence. The Swedish Presidency had invited delegations to consider how the information exchanged can be useful to Member States and what information should be requested from the shell entities.
The majority of delegations were of the opinion that information should not be exchanged until the status of the shell entity has been concluded. Several options were on the table: - exchange information when a presumed shell entity does not object to being thus characterised (‘request a rebuttal’) or when a presumed shell entity has lodged such an objection and this objection has been formally rejected by the tax authority.
In its compromise proposal, a copy of which has been seen by EUROPE, the Presidency nevertheless suggests the automatic exchange of information, irregardless of requests for rebuttal by the entities concerned. It argues that the information exchanged should be as accurate as possible and that corrections should be kept to a minimum. In its view, however, a note from the tax authority refusing an objection from a presumed shell entity should be sufficient to trigger the automatic exchange of information, despite possible appeal procedures.
Regarding the timing of the exchange of information, the Swedish authorities suggest that the exchange of information should take place within 2 months of the end of the quarter in which the objection was made. The original proposal was for this to be an annual exchange.
In previous compromise proposals, it was suggested to include information on the identification of other Member States that might be affected by the reporting of the entity. The Swedish Presidency proposes this time to add a new article requiring the entities concerned to provide the same information to the tax authorities, so that the rules mirror each other. In this way it wishes to avoid additional taxation in the case of ‘relevant income’ received in the form of interest, royalties and dividends from sources in different Member States (see EUROPE 13128/17).
Finally, according to the Presidency, if neither the tax identification number nor the date and place of birth are included in the exchange of information on asset holders, this information will not be of use to the tax authority concerned. Indeed, if a shell company holds assets for the private use of the shareholder, the Member State of the shareholder might be interested in applying wealth tax or other tax rules such as the presumptive taxation of dividends. (Original version in French by Anne Damiani)