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European Commission Launches Public Consultation on an Initiative to Fight Tax Evasion and Aggressive Tax Planning by Addressing the Role of Enablers — Orbitax Tax News & Alerts

The European Commission has launched a public consultation on Tax evasion & aggressive tax planning in the EU – tackling the role of enablers. The initiative aims to step up the fight against tax evasion and aggressive tax planning by addressing the role of enablers who create these complex and non-transparent structures. This includes three main options as well as new requirements for both individuals and legal persons in the EU to declare any participation above 25% of the shares, voting rights, ownership interest, bearer shareholdings, or control via other means in a non-listed company located outside of the EU. The consultation period ends on 12 October 2022.

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Objectives and Policy options

The overall objective of this initiative is to prohibit enablers who design, market and/or assist in the creation of tax arrangements or schemes in non-EU countries that lead to tax evasion or aggressive tax planning for the EU Member States. The proposal will include clear and objective criteria for defining the forms of aggressive tax planning that are prohibited This initiative is in line with the Commission's continued commitment to fighting tax evasion and aggressive tax planning.

The baseline scenario used as a benchmark assumes that the current national legislative rules and administrative practices on enablers remain unchanged. The Commission will assess a range of policy options, which may lead to a legislative initiative, to achieve the objectives based on the principle of proportionality. A range of policy options might include the following:

Option 1: Requirement for all enablers to carry out dedicated due diligence procedures

This option involves a prohibition on enablers from assisting in the creation of arrangements abroad that facilitate tax evasion or aggressive tax planning. In addition, this option foresees the requirement for all enablers to carry out a test to check whether the arrangement or scheme they are facilitating leads to tax evasion or aggressive tax planning. It also requires the enabler to maintain records of these due diligence procedures in all cases. This option could be combined with appropriate measures to address possible non-compliance.

Option 2: Prohibition to facilitate tax evasion and aggressive tax planning combined with due diligence procedures and a requirement for enablers to register in the EU

This option involves a prohibition on enablers from assisting in the creation of arrangements abroad that facilitate tax evasion or aggressive tax planning. The enablers covered by the scope would be required to carry out dedicated due diligence procedures as outlined under Option 1. In addition, enablers that provide advice or services of a tax nature to EU taxpayers or residents would be required to register in an EU Member State. Only registered enablers could provide advice or services of a tax nature to EU taxpayers or residents. In cases of noncompliance, enablers may be removed from the registry.

Option 3: Code of conduct for all enablers

This option involves the requirement for all enablers to follow a code of conduct that obliges enablers to ensure that they do not facilitate tax evasion or aggressive tax planning.

In addition and regardless of the policy option chosen, a new measure to boost transparency and combat possible tax evasion and aggressive tax planning related to EU investments abroad could be developed. This would require EU taxpayers (both individuals and legal persons) to declare in their annual tax returns any participation above 25% of shares, voting rights, ownership interest, bearer shareholdings or control via other means (the level commonly used in the EU AML legislation) in a non-listed company located outside of the EU.