Legal provisions of COM(2021)565 - Rules to prevent the misuse of shell entities for tax purposes

Please note

This page contains a limited version of this dossier in the EU Monitor.

dossier COM(2021)565 - Rules to prevent the misuse of shell entities for tax purposes.
document COM(2021)565 EN
date December 22, 2021


CHAPTER I
GENERAL PROVISIONS

Contents

Article 1 - Subject matter

This Directive lays down indicators of minimum substance for undertakings in Member States and rules regarding the treatment for tax purposes of those undertakings that do not meet the indicators.

Article 2 - Scope

This Directive applies to all undertakings that are considered tax resident and are eligible to receive a tax residency certificate in a Member State.

This Directive is without prejudice to other legal acts of the Union.

Article 3 - Definitions

For the purposes of this Directive the following definitions shall apply:

(1)‘undertaking’ means any entity engaged in an economic activity, regardless of its legal form, that is a tax resident in a Member State;

(2)‘tax year’ means a tax year, calendar year or any other appropriate period for tax purposes;

(3)‘revenues’ means the sum of the net turnover, other operating income, income from participating interests, including dividends received from affiliated undertakings, income from other investments and loans forming part of the fixed assets, other interest receivable and similar income as listed in Annexes V and VI to Directive 2013/34/EU of the European Parliament and of the Council 19 ;

(4)‘Member State of the undertaking’ means the Member State where the undertaking is resident for tax purposes;

(5)‘beneficial owner’ means beneficial owner as defined in Article 3, point (6), of Directive (EU) 2015/849 of the European Parliament and of the Council;

(6)‘undertaking’s shareholders’ means the individuals or entities directly holding shares, interest, stakes, participations, membership rights, entitlement to benefits or any equivalent rights or entitlements in the undertaking and in the case of indirect holdings, those individuals or entities holding interest in the undertaking through one or a chain of undertakings none of which fulfils the indicators of minimum substance set out in Article 7(1) of this Directive.

Article 4 - Relevant income

For the purposes of Chapters II and III ‘relevant income’ shall mean income falling under any of the following categories:

(a)interest or any other income generated from financial assets, including crypto assets, as defined in Article 3(1), point 2 of the proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets, and amending Directive (EU) 2019/1937 20 ;

(b)royalties or any other income generated from intellectual or intangible property or tradable permits;

(c)dividends and income from the disposal of shares;

(d)income from financial leasing;

(e)income from immovable property;

(f)income from movable property, other than cash, shares or securities, held for private purposes and with a book value of more than one million euro.

(g)income from insurance, banking and other financial activities;

(h)income from services which the undertaking has outsourced to other associated enterprises.

Article 5 - Associated enterprise

1. For the purposes of Articles 4 and 7,‘associated enterprise’ shall mean a person who is related to another person in any of the following ways:

(a)a person participates in the management of another person by being in a position to exercise a significant influence over the other person;

(b)a person participates in the control of another person through a holding that exceeds 25 % of the voting rights;

(c)a person participates in the capital of another person through a right of ownership that, directly or indirectly, exceeds 25 % of the capital;

(d)a person is entitled to 25 % or more of the profits of another person.

2. If more than one person participates in the management, control, capital or profits of the same person, as referred to in paragraph 1, all persons concerned shall be regarded as associated enterprises.

If the same persons participate in the management, control, capital or profits of more than one person, as referred to in paragraph 1, all persons concerned shall be regarded as associated enterprises.

3. For the purposes of paragraphs 1 and 2, a person shall mean both legal and natural persons. A person who acts together with another person in respect of the voting rights or capital ownership of an entity shall be treated as holding a participation in all of the voting rights or capital ownership of that entity that are held by the other person.

4. In indirect participations, the fulfilment of the criteria set out in point (c) of paragraph 1 shall be determined by multiplying the rates of holding through the successive tiers. A person holding more than 50 % of the voting rights shall be deemed to hold 100 %.

An individual, his or her spouse and his or her lineal ascendants or descendants shall be treated as a single person.


CHAPTER II
IDENTIFICATION OF UNDERTAKINGS THAT DO NOT MEET INDICATORS OF MINIMUM SUBSTANCE FOR TAX PURPOSES

Article 6 - The reporting undertakings

1. Member States shall require that undertakings meeting the following criteria to report to the competent authorities of Member States in accordance with Article 7:

(a)more than 75% of the revenues accruing to the undertaking in the preceding two tax years is relevant income;

(b)the undertaking is engaged in cross-border activity on any of the following grounds:

(i)more than 60% of the book value of the undertaking’s assets that fall within the scope of Article 4, points (e) and (f), was located outside the Member State of the undertaking in the preceding two tax years;

(ii)at least 60% of the undertaking’s relevant income is earned or paid out via cross-border transactions;

(c)in the preceding two tax years, the undertaking outsourced the administration of day-to-day operations and the decision-making on significant functions.

An undertaking which holds assets that can generate income falling within the scope of Article 4, points (e) and (f), shall also be deemed to meet the criterion set out in point (a) of the first subparagraph, irrespective of whether income from these assets has accrued to the undertaking in the preceding two tax years, if the book value of these assets is more than 75% of the total book value of the undertaking’s assets.

An undertaking which holds assets that can generate income falling within the scope of Article 4, point (c), shall also be deemed to meet the criterion set out in point (a) of the first subparagraph, irrespective of whether income from these assets has accrued to the undertaking in the preceding two tax years, if the book value of these assets is more than 75% of the total book value of the assets of the undertaking.

2. By derogation from paragraph 1, Member States shall ensure that the undertakings falling within any of the following categories are not subject to requirements of Article 7:

(a)companies which have a transferable security admitted to trading or listed on a regulated market or multilateral trading facility as defined under Directive 2014/65/EU of the European Parliament and of the Council 21 ;

(b)regulated financial undertakings;

(c)undertakings that have the main activity of holding shares in operational businesses in the same Member State while their beneficial owners are also resident for tax purposes in the same Member State;

(d)undertakings with holding activities that are resident for tax purposes in the same Member State as the undertaking’s shareholder(s) or the ultimate parent entity, as defined in Section I, point 7, of Annex III to Directive 2011/16/EU;

(e)undertakings with at least five own full-time equivalent employees or members of staff exclusively carrying out the activities generating the relevant income;

Point (b) of the first subparagraph shall apply to the following ‘regulated financial undertakings’:

(a)a credit institution as defined in Article 4(1), point (1), of Regulation (EU) No 575/2013 the European Parliament and of the Council 22 ;

(b)an investment firm as defined in Article 4(1), point (1), of Directive 2014/65/EU the European Parliament and of the Council 23 ; 

(c)an alternative investment fund manager (AIFM) as defined in Article 4(1), point (b), of Directive 2011/61/EU of the European Parliament and of the Council (2), including a manager of Euveca under Regulation (EU) No 345/2013 of the European Parliament and of the Council 24 , a manager of Eusef under Regulation (EU) No 346/2013 of the European Parliament and of the Council 25 and a manager of Eltif under Regulation (EU) 2015/760 of the European Parliament and of the Council 26 ;

(d)an undertaking for collective investment in transferable securities (UCITS) management company as defined Article 2(1), point (b), of Directive 2009/65/EC of the European Parliament and of the Council 27 ;

(e)an insurance undertaking as defined in Article 13, point (1), of Directive 2009/138/EC of the European Parliament and of the Council 28 ;

(f)a reinsurance undertaking as defined in Article 13, point (4), of Directive 2009/138/EC;

(g)an institution for occupational retirement provision as defined in Article 1, point (6) of Directive 2016/2341 of the European Parliament and of the Council 29 ;

(h)pension institutions operating pension schemes which are considered to be social security schemes covered by Regulation (EC) No 883/2004 of the European Parliament and of the Council 30 and Regulation (EC) No 987/2009 of the European Parliament and of the Council 31 as well as any legal entity set up for the purpose of investment of such schemes;

(i)an alternative investment fund (AIF) managed by an AIFM as defined in Article 4(1), point (b), of Directive 2011/61/EU or an AIF supervised under the applicable national law;

(j)UCITS in the meaning of Article 1(2) of Directive 2009/65/EC;

(k)a central counterparty as defined in Article 2, point (1), of Regulation (EU) No 648/2012 of the European Parliament and of the Council 32 ;

(l)a central securities depository as defined in Article 2(1), point (1), of Regulation (EU) No 909/2014 of the European Parliament and of the Council 33 ;

(m)an insurance or reinsurance special purpose vehicle authorised in accordance with Article 211 of Directive 2009/138/EC;

(n) ‘securitisation special purpose entity’ as defined in Article 2, point (2), of Regulation (EU) No 2017/2402 of the European Parliament and of the Council 34 ;

(o)an insurance holding company as defined in Article 212(1), point (f), of Directive 2009/138/EC or a mixed financial holding company as defined in Article 212(1), point (h), of Directive 2009/138/EC, which is part of an insurance group that is subject to supervision at the level of the group pursuant to Article 213 of that Directive and which is not exempted from group supervision pursuant to Article 214(2) of Directive 2009/138/EC;

(p)a payment institution as defined in point (d) of Article 1(1) of Directive (EU) 2015/2366 of the European Parliament and of the Council 35 ;

(q)an electronic money institution as defined in point (1) of Article 2 of Directive 2009/110/EC of the European Parliament and of the Council 36 ;

(r)a crowdfunding service provider as defined in point (e) Article 2(1) of Regulation (EU) 2020/1503 of the European Parliament and of the Council 37 ;

(s)a crypto-asset service provider as defined in Article 3(1), point (8), of [the proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets, and amending Directive (EU) 2019/1937 38 ] where performing one or more crypto-asset services as defined in Article 3(1), point (9), of [the proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets, and amending Directive (EU) 2019/1937].

Article 7 - Indicators of minimum substance for tax purposes

1. Member States shall require that undertakings meeting the criteria laid down in Article 6(1) declare in their annual tax return, for each tax year, whether they meet the following indicators of minimum substance:

(a)the undertaking has own premises in the Member State, or premises for its exclusive use;

(b)the undertaking has at least one own and active bank account in the Union;

(c)one of the following indicators:

(i)One or more directors of the undertaking:

(1) are resident for tax purposes in the Member State of the undertaking, or at no greater distance from that Member State insofar as such distance is compatible with the proper performance of their duties; 

(2) are qualified and authorised to take decisions in relation to the activities that generate relevant income for the undertaking or in relation to the undertaking’s assets;

(3) actively and independently use the authorisation referred to in point (2) on a regular basis;

(4) are not employees of an enterprise that is not an associated enterprise and do not perform the function of director or equivalent of other enterprises that are not associated enterprises;

(ii)the majority of the full-time equivalent employees of the undertaking are resident for tax purposes in the Member State of the undertaking, or at no greater distance from that Member States insofar as such distance is compatible with the proper performance of their duties, and such employees are qualified to carry out the activities that generate relevant income for the undertaking.

2. Undertakings referred to in paragraph 1 shall accompany their tax return declaration with documentary evidence. The documentary evidence  shall include the following information:

(a)address and type of premises;

(b)amount of gross revenue and type thereof;

(c)amount of business expenses and type thereof;

(d)type of business activities performed to generate the relevant income;

(e)the number of directors, their qualifications, authorisations and place of residence for tax purposes or the number of full-time equivalent employees performing the business activities that generate the relevant income and their qualifications, their place of residence for tax purposes;

(f)outsourced business activities;

(g)bank account number, any mandates granted to access the bank account and to use or issue payment instructions and evidence of the account’s activity.

Article 8 - Presumption of minimum substance for tax purposes

1. An undertaking that declares to meet all the indicators of minimum substance set out in Article 7(1) and provides the satisfactory supporting documentary evidence in accordance with Article 7(2) shall be presumed to have minimum substance for the tax year.

2. An undertaking that declares not to meet one or more of the indicators set out in Article 7(1) or does not provide satisfactory supporting documentary evidence in accordance with Article 7(2) shall be presumed not to have minimum substance for the tax year.

Article 9 - Rebuttal of the presumption

1. Member States shall take the appropriate measures to allow undertakings that are presumed not to have minimum substance under Article 8(2) to rebut this presumption by providing any additional supporting evidence of the business activities which they perform to generate relevant income.

2. For the purposes of paragraph 1, undertakings shall provide the following additional evidence:

(a)a document allowing to ascertain the commercial rationale behind the establishment of the undertaking;

(b)information about the employee profiles, including the level of their experience, their decision-making power in the overall organisation, role and position in the organisation chart, the type of their employment contract, their qualifications and duration of employment;

(c)concrete evidence that decision-making concerning the activity generating the relevant income is taking place in the Member State of the undertaking.

3. A Member State shall treat an undertaking as having rebutted the presumption if the evidence that the undertaking has provided under paragraph 2 proves that the undertaking has performed and continuously had control over, and borne the risks of, the business activities that generated the relevant income or, in the absence of income, the undertaking’s assets.

4. After the end of the tax year for which the undertaking rebutted the presumption successfully, inaccordance with paragraph 3, a Member State may consider for a period of five years that the undertaking has rebutted the presumption on the condition that the factual and legal circumstances of the undertaking remain unchanged during this period.

Article 10 - Exemption

1. A Member State shall take the appropriate measures to allow an undertaking that meets the criteria laid down in Article 6(1) to request an exemption from its obligations under this Directive if the existence of the undertaking does not reduce the tax liability of its beneficial owner(s) or of the group, as a whole, of which the undertaking is a member.

2. A Member State may grant that exemption for one tax year if the undertaking provides sufficient and objective evidence that its interposition does not lead to a tax benefit for its beneficial owner(s) or the group as a whole, as the case may be. That evidence shall include information about the structure of the group and its activities. That evidence shall allow to compare the amount of overall tax due by the beneficial owner(s) or the group as a whole, as the case may be, having regard to the interposition of the undertaking, with the amount that would be due under the same circumstances in the absence of the undertaking.

3. After the end of the tax year for which an exemption was granted in accordance with paragraph 2, a Member State may extend the validity of the exemption for five years on the condition that the factual and legal circumstances of the undertaking, including of the beneficial owner(s) and the group, as the case may be, remain unchanged in the relevant period.


CHAPTER III
TAX TREATMENT OF UNDERTAKINGS THAT DO NOT HAVE MINIMUM SUBSTANCE FOR TAX PURPOSES

Article 11 - Tax consequences of not having minimum substance for tax purposes in Member States other than the Member State of the undertaking

1. Member States other than the Member State of the undertaking shall disregard any agreements and conventions that provide for the elimination of double taxation of income, and where applicable, capital, in force with the Member State of the undertaking as well as Articles 4, 5 and 6 of Directive 2011/96/EU and Article 1 of Directive 2003/49/EC, to the extent that those Directives apply due to the undertaking being deemed to be resident for tax purposes in a Member State, where the following conditions are met:

(a)an undertaking is presumed not to have minimum substance;

(b)an undertaking does not rebut the presumption referred to in point (a) for a tax year. 

2. The Member State of the undertaking’s shareholder(s) shall tax the relevant income of the undertaking in accordance with its national law as if it had directly accrued to the undertaking’s shareholder(s) and deduct any tax paid on such income at the Member State of the undertaking, where the following conditions are met:

(a)the relevant income accrues to an undertaking that is presumed not to have minimum substance;

(b)the undertaking does not rebut the presumption referred to in point (a);

(c)both the undertaking’s shareholders and the payer are resident for tax purposes in a Member State.

The first subparagraph shall apply notwithstanding any agreement or convention that provides for the elimination of double taxation of income, and where applicable, capital, in force with another Member State.

Where the payer is not resident for tax purposes in a Member State, the Member State of the undertaking’s shareholder(s) shall tax the relevant income accruing to the undertaking in accordance with its national law as if it had directly accrued to the undertaking’s shareholder(s), without prejudice to any agreement or convention that provides for the elimination of double taxation of income, and where applicable, capital, in force between the Member State of the undertaking’s shareholders and the third country jurisdiction of the payer;

Where the undertaking’s shareholder(s) is not resident for tax purposes in a Member State, the Member State of the payer of this income shall apply withholding tax in accordance with its national law, without prejudice to any agreement or convention that provides for the elimination of double taxation of income, and where applicable, capital, in force with the third country jurisdiction of the undertaking’s shareholder(s).

3. Where property referred to in Article 4 is owned by an undertaking that is presumed not to have minimum substance and does not rebut this presumption:

(a)the Member State where property referred to in Article 4, point (e) is situated shall tax such property according to its national law, as if such property was owned directly by the undertaking’s shareholder(s), without prejudice to any agreement or convention that provides for the elimination of double taxation of income, and where applicable, capital, in force with the jurisdiction of the undertaking’s shareholder(s);

(b)the Member State of the undertaking’s shareholder(s) shall tax such property in accordance with its national law as if the undertaking’s shareholder(s) owned it directly, without prejudice to any agreement or convention that provides for the elimination of double taxation of income, and where applicable, capital, in force with the jurisdiction where the property is situated.

Article 12 - Tax consequences of not having minimum substance for tax purposes in the Member State of the undertaking

Where an undertaking does not have minimum substance for tax purposes in the Member State where it is resident for tax purposes, that Member State shall take any of the following decisions:

(a)deny a request for a certificate of tax residence to the undertaking for use outside the jurisdiction of this Member State;

(b)grant a certificate of tax residence which prescribes that the undertaking is not entitled to the benefits of agreements and conventions that provide for the elimination of double taxation of income, and where applicable, capital, and of international agreements with a similar purpose or effect and of Articles 4, 5 and 6 of Directive 2011/96/EU and Article 1 of Directive 2003/49/EC.


CHAPTER IV
EXCHANGE OF INFORMATION

Article 13 - Amendments to Directive 2011/16/EU

Directive 2011/16/EU is amended as follows:

(1) in Article 3, point 9 is amended as follows:

(a)point (a) is replaced by the following:

“(a) for the purposes of Article 8(1) and Articles 8a to 8ad, the systematic communication of predefined information to another Member State, without prior request, at pre-established regular intervals; for the purposes of Article 8(1), reference to available information relates to information in the tax files of the Member State communicating the information, which is retrievable in accordance with the procedures for gathering and processing information in that Member State;”

(b)point (c) is replaced by the following:

“(c) for the purposes of provisions of this Directive other than Article 8(1) and (3a) and Articles 8a to 8ad, the systematic communication of predefined information provided in points (a) and (b) of this point.”

(2) In Section II of Chapter II, the following Article 8ad is added:

“Article 8ad
Scope and conditions of mandatory automatic exchange of information on undertakings required to report on indicators of minimum substance

1. The competent authority of a Member State, which receives information from an undertaking established in its territory in accordance with Article 7 of Council Directive [OP] (insert full title and OJ reference)* shall, by means of automatic exchange, and within 30 days from receipt of that information, communicate such information to the competent authorities of all other Member States in accordance with paragraph 4 and applicable practical arrangements adopted pursuant to Article 21.

2. The competent authority of a Member State, which certifies that an undertaking has rebutted the presumption in accordance with Article 9 of Directive [OP] or that an undertaking is exempt in accordance with Article 10 of that Directive shall, by means of automatic exchange, and within 30 days from such certification, communicate such information to the competent authorities of all other Member States, in accordance with applicable practical arrangements adopted pursuant to Article 21.

3. The competent authority of a Member State, which concludes including by way of an audit, under the national law of such Member State, that an undertaking does not meet the indicators of minimum substance laid down in Article 7 of Directive [OP] shall, by means of automatic exchange, and within 30 days from the date when the outcome of the audit becomes definitive, communicate such information to the competent authorities of all other Member States, in accordance with applicable practical arrangements adopted pursuant to Article 21.

4. The information to be communicated by a competent authority of a Member State pursuant to paragraph 1 regarding each undertaking shall include the following:

(a)the tax identification number (TIN) of the undertaking required to report pursuant to Article 6 of Directive [OP];

(b)the VAT number, where available, of the undertaking required to report pursuant to Article 6 of Directive [OP];

(c)the identification of the undertaking’s shareholders and the beneficial owner(s) of the undertaking, as defined in Article 3, points 5 and 6;

(d)the identification of the other Member States, if any, likely to be concerned by the reporting of the undertaking;

(e)the identification of any person in the other Member States likely to be affected by the reporting of the undertaking;

(f)the declaration provided by the undertaking, in accordance with Article 7(1);

(g)summary of the evidence provided by the undertaking in accordance with Article 7(2).

5. Without prejudice to paragraph 4, the information to be communicated by a competent authority of a Member State pursuant to paragraph 2 shall also include the following:

(h)the certification by the competent authority of the Member State that the undertaking has rebutted the presumption under Article 9 of Directive [OP] or that the undertaking is exempt from reporting in accordance with Article 10 of that Directive;

(i)a summary of the additional evidence considered relevant by the competent authority to issuing the certification that the presumption has been rebutted under Article 9 of Directive [OP] or that the undertaking is exempt from reporting under Article 10 of that Directive.

6. Without prejudice to paragraph 4, the information to be communicated by a competent authority of a Member State pursuant to paragraph 3 shall also include the audit report where such report is issued by the competent authority.

7. To facilitate the exchange of information referred to in paragraphs 4, 5 and 6, the Commission shall, by means of implementing acts, adopt the practical arrangements necessary for the implementation of paragraphs 1 to 6 of this Article, including measures to standardise the communication of the information set out in paragraphs 4, 5 and 6 of this Article. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 26(2).

8. For the purposes of paragraphs 1 to 5 of this Article, ‘undertaking’ shall mean undertaking as defined in Article 3, point (1) of Directive [OP].

9. Information processed shall be retained for 5 years and in any case no longer than necessary to achieve the purposes of this Directive.

10. Competent authorities of each Member State shall be considered to be data controllers and the Commission shall be considered to be data processor.

11. Member States in the event of an unauthorised disclosure of information referred to in points (a) – (f) of paragraph 4 may decide to suspend, as a mitigating measure, the exchanges of information under this Directive with the Member State where the unauthorised disclosure occurred.”

(3) in Article 20, paragraph 5 is replaced by the following:

“5.The Commission shall, by means of implementing acts, adopt standard forms, including the linguistic arrangements, in the following cases:

(a)for the automatic exchange of information on advance cross-border rulings and advance pricing arrangements pursuant to Article 8a before 1 January 2017;

(b)for the automatic exchange of information on reportable cross-border arrangements pursuant to Article 8ab before 30 June 2019;

(c)for the automatic exchange of information on undertakings required to report on indicators of minimum substance pursuant to Article 8ad before 1 January 2024.

Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 26(2).

Those standard forms shall not exceed the components for the exchange of information listed in Article 8a(6), Article 8ab(14) and Article 8ad(4), (5) and (6), and such other related fields which are linked to these components which are necessary to achieve the objectives of Articles 8a, 8ab and 8ac, respectively.

The linguistic arrangements referred to in the first subparagraph shall not preclude Member States from communicating the information referred to in Articles 8a, 8ab and 8ad in any of the official languages of the Union. However, those linguistic arrangements may provide that the key elements of such information shall also be sent in another official language of the Union.”;

(4) in Article 21, paragraph 5 is replaced by the following:

“5.The Commission shall by 31 December 2017 develop and provide with technical and logistical support a secure Member State central directory on administrative cooperation in the field of taxation where information to be communicated in the framework of Article 8a(1) and (2) shall be recorded in order to satisfy the automatic exchange provided for in those paragraphs.

The Commission shall by 31 December 2019 develop and provide with technical and logistical support a secure Member State central directory on administrative cooperation in the field of taxation where information to be communicated in the framework of Article 8ab(13), (14) and (16) shall be recorded in order to satisfy the automatic exchange provided for in those paragraphs.

The Commission shall by 30 June 2024 develop and provide with technical and logistical support a secure Member State central directory on administrative cooperation in the field of taxation where information to be communicated in the framework of Article 8ad(1), (2) and (3) shall be recorded in order to satisfy the automatic exchange provided for in those paragraphs.

The competent authorities of all Member States shall have access to the information recorded in that directory. The Commission shall also have access to the information recorded in that directory, however within the limitations set out in Articles 8a(8) and 8ab(17). The Commission shall, by means of implementing acts, adopt the necessary practical arrangements for the implementation of the first, second and third subparagraph of this paragraph. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 26(2).

Until that secure central directory is operational, the automatic exchange provided for in Article 8a(1) and (2), Article 8ab(13), (14) and (16) and Article 8ad(1), (2) and (3) shall be carried out in accordance with paragraph 1 of this Article and the applicable practical arrangements.”.


CHAPTER V
ENFORCEMENT

Article 14 - Penalties

Member States shall lay down the rules on penalties applicable to infringements of national provisions adopted pursuant to this Directive, and shall take all measures necessary to ensure that they are implemented. The penalties provided for shall be effective, proportionate and dissuasive.

Member States shall ensure that those penalties include an administrative pecuniary sanction of at least 5% of the undertaking’s turnover in the relevant tax year, if the undertaking that is required to report pursuant to Article 6 does not comply with such requirement for a tax year within the prescribed deadline or makes a false declaration in the tax return under Article 7.

Article 15 - Request for tax audits

Where the competent authority of one Member State has reason to believe that an undertaking which is resident for tax purposes in another Member State has not met its obligations under this Directive, the former Member State may request the competent authority of the latter to conduct a tax audit of the undertaking.

The competent authority of the requested Member State shall initiate it within one month from the date of receipt of the request and conduct the tax audit, in accordance with the rules governing tax audits in the requested Member State.

The competent authority which conducted the tax audit shall provide feedback on the outcome of such audit to the competent authority of the requesting Member State as soon as possible and no later than one month after the outcome of the tax audit is known.

Article 16 - Monitoring

1. Member States shall communicate the following information to the Commission for each tax year:

(a)number of undertakings that meet the conditions laid down in Article 6(1);

(b)number of undertakings that reported pursuant to Article 7;

(c)penalties imposed pursuant to Article 14 for non-compliance with the requirements of this Directive;

(d)number of undertakings presumed not have minimum substance in accordance with Article 8 and number of undertakings that rebutted such presumption in accordance with Article 9;

(e)number of undertakings exempt from the requirements under this Directive in accordance with Article 10;

(f)number of audits to undertakings that meet the conditions laid down in Article 6(1),

(g)number of cases where an undertaking presumed to have minimum substance was found not to have substantial activity, in particular following an audit;

(h)number of requests for exchange of information submitted and number of requests received;

(i)number of requests for tax audits submitted and number of requests received.

Member States shall communicate to the Commission any other information necessary for monitoring and evaluating the implementation of this Directive upon request by the Commission.

2. Member States shall communicate the information listed in paragraph 1 on a bi-annual basis by 31 December of the tax year following the end of the bi-annual period.

Article 17 - Reports 

1. By 31 December 2028, the Commission shall present a report to the European Parliament and the Council on the implementation of this Directive.

2. When drawing up the report, the Commission shall take into account the information communicated by the Member States pursuant to Article 15.

3. The Commission shall publish the report on its website.


CHAPTER VI
FINAL PROVISIONS

Article 18 - Transposition

1. Member States shall adopt and publish, by [30 June 2023] at the latest, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those provisions.

They shall apply those provisions from [1 January 2024].

When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.

1. Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

Article 19 - Entry into force

This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Article 20 - Addressees

This Directive is addressed to the Member States.