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Officials Express Concerns About the EU’s Proposed Anti-Shell-Company Law

22nd June 2022

TP in 5 social image EU concerns

The EU makes no secret about the way it feels about shell companies. In fact, in December it proposed a law that would slap shell companies with more compliance burdens and deny them tax breaks and benefits. How does it work? Should a company meet certain thresholds, it would be under the suspicion of being a shell company. It would be required to provide tax authorities with more information about their businesses.  

But officials on the European Parliament Economic and Monetary Affairs Committee have some concerns. The group, which is preparing Parliament’s opinion on the proposal, claims that the shell company law would cause uneven compliance obligations between companies, and therefore, the screening should be more relaxed.  

One threshold causing concern is a proposal stating if 75% of a company’s income isn’t derived from business activities, then that company would be seen as a potential shell company and need to provide tax authorities with more information. Officials on the European Parliament Economic and Monetary Affairs Committee claim that the 75% should be raised to 80%. Also, the penalty for noncompliance—5% of a company’s revenue—seems steep. The Committee thinks 2.5% of a company’s revenue sounds more like it.   

There’s still a few votes standing between the proposal, an amended proposal, and a new anti-shell-company law. The committee will vote to amend the proposal in (probably) November, and then Parliament will vote to adopt the opinion (likely December). And then there’s the real challenge: EU member states will have to vote to pass the law—and all 27 must agree unanimously.