While shell, or letterbox, entities can serve useful commercial and business functions, some international groups and even individuals abuse them for aggressive tax planning or tax evasion purposes. Certain businesses direct financial flows to shell entities in jurisdictions that have no or very low taxes, or where taxes can easily be circumvented. Similarly, some individuals can use shells to shield assets and real estate from taxes, either in their country of residence or in the country where the property is located.

Executive Vice-President for an Economy that Works for People, Valdis Dombrovskis, said: “Shell companies continue to offer criminals an easy opportunity to abuse tax obligations. We have seen too many scandals arising from misuses of shell companies over the years. They damage the economy and society as a whole, also placing an unfair extra burden on European taxpayers. Today, we are moving to the next level in our longstanding fight against abusive tax arrangements and in favour of more corporate transparency. New monitoring and reporting requirements for shell companies will make it harder for them to enjoy unfair tax advantages and easier for national authorities to track any abuse arising from shell companies. There is no place in Europe for those who exploit the rules for the purpose of tax evasion, avoidance or money laundering: everyone should pay their fair share of tax.”