On Friday, December 24, Executive Vice President of the European Commission for An Economy that Works for People Valdis Dombrovskis said that the EU intends to continue to fight those who evade taxes with the help of shell companies.
The European Commission is of the opinion that organizations operating in the EU, which practically do not conduct commercial activities, should not be able to receive any tax benefits, as well as burden European taxpayers.
Unfortunately, shell companies continue to provide their services to criminals, thereby abusing tax obligations. Numerous scandals with large organizations are direct proof of this, Dombrovskis stressed.
It is worth noting that the European Commission has recognized that shell companies may have legitimate reasons for their activities, both in terms of their commercial and business functions, they can be used by individuals or groups to drastically reduce their tax obligations or completely evade taxes.
Some businesses direct financial flows to front organizations in jurisdictions where taxes are absent or very low, or where taxes can be easily circumvented. Similarly, some people may use shell companies to protect assets and real estate from taxes either in their country of residence or in the country where their assets are located, for example, real estate, the commissioner noted.
Dombrovskis said that the new monitoring and reporting requirements for fictitious organizations will benefit EU member states in two ways:
- Firstly, they will prevent these organizations from taking advantage of tax benefits designed to help honest companies conduct legitimate commercial activities.
- Secondly, they will help the tax authorities and other national authorities in their efforts to identify and track any illegal activities of shell companies.
There is no place in Europe for those who use tricks to evade taxes or money laundering. Everyone should pay their fair share of taxes, Dombrovskis said.
At the end of January 2021, the European Commission published a draft directive that imposes certain obligations on EU member states to implement measures to combat tax evasion.
These measures are largely a reflection of the previously developed OECD Project to counteract the erosion and profit shifting (BEPS). The main focus is on the fight against "aggressive" tax planning. International corporations must pay taxes at the place where they receive their profits — this is the main condition that is planned to be implemented.
The European Union has calculated that budget losses due to unscrupulous taxpayers amount to 50 to 70 billion euros annually. This amount turned out to be almost equal to Bulgaria's GDP. The EU government does not want to put up with such large-scale losses. Especially, taking into account the existing problems with budget deficits in many member countries of the bloc.
The package of measures to combat corporate tax evasion, developed by the European Commission, calls on EU countries to adopt a stronger and coordinated position against companies that seek to avoid paying their share of taxes, and to begin the targeted implementation of international standards against the erosion of the tax base and the withdrawal of profits from taxation.
The new package of measures proposed by the European Commission includes:
- mandatory measures aimed at blocking all the main methods that companies use to evade taxes
- recommendations for EU member states on how to prevent abuse of the terms of tax agreements
- proposal for EU member states to share tax information on multinational corporations operating in the EU
- actions aimed at promoting effective management in the field of taxation at the international level
- a new process within the EU is the inclusion of third countries that refuse to cooperate in special "black lists".
It should be mentioned that Cyprus is one of the most popular jurisdictions of the European Union, attracting investors and businessmen from all over the world with low tax rates.
The island state has created a favorable business environment, abounds in various preferences and allows you to legally optimize tax payments. The year 2021 will be remembered by the owners of local companies with the introduction of a central register of final beneficial owners, which is aimed at preventing and suppressing money laundering.
According to the Law of Cyprus, now any legal entity is obliged to receive, store and transmit adequate, accurate and up-to-date information about its beneficial ownership, including detailed information about beneficial ownership shares.
The developed guide is aimed at solving key issues:
- who can be identified as the beneficial owner
- to what extent should UBO submit information
- how to correctly enter information into a centralized registry
- by what methods should the real owners of the Cyprus business be determined
- the degree of responsibility for failure to submit data to the registry
- granting a grace period to companies for data collection and transmission
- how the actual owners of trusts and similar legal entities are determined.
Supporters of stricter anti-money laundering laws are confident that the introduction of a new registry can have a significant impact on Cyprus, since the country has been a place of attraction for individuals hiding their capital behind dummy companies for many years.
Interested in housing in Cyprus? Visit DOM. The portal presents the largest real estate database in the country – from residential to commercial. Choose and contact professionals who will help you make the right choice!