Foreign experience in identifying shell companies

Shell company is an international phenomenon. Around the world and, in particular, in Europe, the issue of misuse of preferential taxation using front companies and persons is relevant. The European Commission proposes to introduce minimum requirements and criteria for the verification of signs.

IDENTIFICATION OF SHELL COMPANIES IN THE EUROPEAN UNION

Minimum requirements:

• the company must have owned or rented premises in the EU country;
• the company must have an active bank account in the EU;
• the CEO must be a tax resident of the EU or the majority of employees must be tax residents.

Negative signs:

• more than 75% of revenues come from passive income sources such as interest, dividends, leasing and real estate;
• more than 60% of assets are located outside the Member State or at least 60% of income is earned or paid out via cross-border transactions;
• administration and decision-making is outsourced.

Consequences of non-compliance with the requirements:

• denial of tax benefits, including under double tax treaties;
• shell company shareholders' income is subject to tax rules similar to Controlled Foreign Corporation, CFC
• a request for a tax residency certificate for a tax deduction in other jurisdictions will be denied.

Exceptions:

• public companies;
• companies the activities of which are governed by separate directives;
• holding companies;
• companies having passive income and at least 5 internal employees managing the activities;
• companies operating exclusively within the country.

The proposals of the European Commission to Directive 2011/16/EU on the identification of shell companies will come into effect from January 1, 2024.

The need for information on foreign companies is growing from year to year. The annual increase in requests to the Information and Analytical system Globas for obtaining up-to-date information on foreign companies is 25%.

The capabilities of Globas for checking foreign companies:

• 400+ million organizations worldwide;
• online and offline reports;
• obtaining online reports from the Orbis database by the world's leading publisher of electronic databases for the analysis of companies and markets Bureau van Dijk - Moody's Analytics;
• wide network of competent partners all over the world;
• variety of alternative sources;
• check for the affiliation and links with Russian companies;
• experts support.