Ebba Perman Borg
Partner
Stockholm
Newsletter
ATAD III abandoned
by Ebba Perman Borg
Published:
After over three years of negotiations, the EU Council has formally abandoned the proposed Unshell Directive (ATAD III), which aimed to combat tax avoidance through shell entities. The decision was confirmed in ECOFIN Report 9960/25, issued on 18 June 2025.
Originally introduced to curb tax avoidance via shell entities, the Unshell proposal aimed to implement "gateway" substance tests and deny access to tax treaties and EU directives for entities failing those tests. However, despite prolonged negotiations, Member States were unable to agree on key elements of the directive.
As Member States could not reach consensus, alternative approaches were considered. One such approach proposed a two-stage process: first, a DAC6-style automatic exchange of information based on hallmarks, followed by coordinated domestic tax consequences and exchange of best practices across Member States.
Ultimately, the Council noted significant overlap between the proposed Unshell hallmarks and existing DAC6 rules. Many Member States concluded that Unshell’s objectives could instead be met through clarifications or amendments to DAC6. As a result, the Council has decided to terminate further work on the Unshell proposal.
