Members of the European Parliament (MEPs) have adopted their opinion to the EU Commission’s proposed legislation aimed at clamping down on shell companies used for tax purposes
The Commission’s proposal sets out criteria for determining a shell company used for tax avoidance, the ensuing penalties, as well as reporting requirements.
In their opinion, MEPs amended the Commission proposal, notably by slightly lowering the thresholds below which a company is exempt of the reporting requirements of the directive, and by providing for penalties to be levied also on companies with zero or low revenue. They stated that companies subject to the reporting requirements should be obliged to provide more detailed information.
To allow a better distinction between legitimate shell companies and those existing for tax purposes, MEPs also amended the information sharing requirements between member states to ensure a better quality and completeness of data being exchanged.
Specifically on penalties, MEPs stated that these should amount to a minimum of two percent of an undertaking’s revenue in the relevant tax year for failure to report correctly and four percent of revenue for making false declarations. In the case of zero or revenue falling below a threshold set by the national tax authority, the penalty should be based on the undertaking’s total assets.
After the vote, the rapporteur Lídia Pereira, said: “With the vote on the UNSHELL Directive, the Parliament signals its commitment to the fight against tax evasion and aggressive tax planning. It is crucial to differentiate between a real company and a shell entity that is only used to avoid tax obligations. With this opinion we define clear minimum economic substance criteria, a proportionate list of reporting obligations, a balanced set of exemptions, clear consequences for the misuse of shell entities and a dissuasive penalty. We hope that this opinion from the Parliament leads the Council to a proportionate, ambitious and forward-looking decision.”
The opinion shall now be transmitted to the EU Council for its consideration while adopting the directive.