For a detailed explanation of the implementation, consequences and who’s in/out of ATAD3, reference is made to our blog ATAD3 – Who’s In & Who’s Out.
1. Need for holistic approach
ATAD3 is part of a larger effort to combat the use of shell companies for tax avoidance. For example, the ECJ’s decision in the Danish cases clarified the concept of beneficial ownership; the OECD’s Multilateral Instrument, which contains (a.o.) a main purpose clause; and the EU’s ATAD1, ATAD2 and DAC6 initiatives. These developments (a.o.) seek to limit the use of holding and investment companies for the purpose of tax avoidance.
ATAD3 goes a step further by focusing on taxpayers who use shell companies solely for tax purposes. So, when preparing for ATAD3, businesses should take a holistic approach, asking themselves questions like what are our operations, where are these operations controlled from, and what infrastructure is appropriate for these administrative and managerial control functions.
For instance, managing a holding/investment company entails managing its investments. This includes choosing what investments to make, when to buy and sell and how to diversify. It also entails monitoring asset performance and adjusting the investment strategy to meet the company’s financial
