Andrew Howard, Ropes & Gray tax partner, outlines his thoughts on the likely impacts on private equity of the ‘ATAD 3’ EC proposal, designed to prevent the misuse of shell entities for tax purposes
If adopted, the “Directive laying down rules to prevent the misuse of shell entities for tax purposes”, aka “ATAD 3” or the “Unshell Directive”, will deny the benefits of European directives and also the benefit of double tax treaties to EU-based holding companies which fail to meet minimum substance requirements from 2024. Per the draft directive, this applies not just to equity holding companies, but to holding companies for all forms of passive income including income from debt, IP and real estate.
Access to treaties or directives is generally important for holding companies because it is likely that this will ensure that withholding taxes, and in some cases capital gains, will be applied predictably and at the lowest achievable rate applied by the relevant jurisdiction.
Continue Reading ATAD 3 – How Will Private Equity Measure Up?