European Commission publishes draft Directive for preventing the misuse of shell entities (UNSHELL)

Executive summary

On 22 December 2021, the European Commission (the Commission) published a legislative proposal for a Directive setting forth rules to prevent the misuse of shell entities for tax purposes (the draft Directive, UNSHELL, is also referred to as ATAD III). This initiative was announced by the Commission in its Communication on Business Taxation for the 21st century published in May 2021.¹

The draft Directive aims at introducing a European Union (EU)-wide “substance test,” including a…