EU Commission Drops Unshell Directive (ATAD 3)

Dear Sir or Madam,

the EU Commission has officially withdrawn the proposed Unshell Directive (also known as “ATAD 3”) (see ECOFIN report 9960/25 dated 18.06.2025 (pdf)). The directive aimed to make so-called shell companies without sufficient economic substance less attractive from a tax perspective. However, since the Member States could not agree on key issues, the proposal has not been pursued further.

Background of the Directive:

• The goal was to exclude “substance-less” companies from certain tax benefits.
• Extensive reporting obligations and proof-of-substance requirements were envisaged for certain companies.

What does this mean for companies?

• No new reporting obligations regarding substance-less companies.
• No risk of information exchange or tax consequences based solely on the Unshell Directive.
• However, the topic remains relevant: many Member States are implementing their own rules to combat lack of substance.

Conclusion: The Unshell Directive is off the table – but companies with cross-border structures should continue to ensure sufficient substance and economic activity

If you have questions about analyzing your corporate structure and assessing substance in
light of other anti-abuse regulations, we are happy to assist.

Status: June 25, 2025