While the European Union’s implementation of ATAD 3 will not directly affect Swiss entities, it might as a matter of fact make Swiss holding companies more attractive for international corporations and wealthy individuals.


The latest amendments to the European Commission’s draft directive for preventing the misuse of shell entities for tax purposes (ATAD 3, also known as the “Unshell Directive”) which, amongst others, adjust the thresholds imposed under the gateway tests, amend the carve-outs and revise penalties on non-compliance, have been approved by the European Parliament on 17 January 2023. In a next step, the EU Council will have to vote unanimously before it can be adopted at EU level.  

The currently suggested entry into force of ATAD 3 is 1 January 2024 which means that the transposition into EU member states’ domestic laws would be required by 30 June 2023. Given the proposed lookback period of two years, European tax resident entities will have to be compliant with ATAD 3 since 1 January 2022.


In very short, ATAD 3 targets EU tax resident companies or other entities, including partnerships and potentially trusts, that neither have substance – such as offices, employees or equipment – nor perform a genuine economic activity and therefore have mainly passive income. A typical example of an entity meeting these criteria is the holding company. These types of entities are also known as “shells” and are often perceived abusive. However, there are a number of valid reasons to establish a holding company with minimal substance, for example for asset consolidation and reporting purposes, to promote investments or to facilitate or enable cross-border investments. The newly added recital “1a)” in the draft directive undermines the fact that not all holding companies are shells per se.  Despite the introduction of this new recital and certain adjustments to the gateway thresholds and minimum substance requirements, the provisions of the directive in general remain broad, and the reporting and compliance duties remain heavy and burdensome. Ultimately, the directive will impact each and every EU holding entity owned by an international group, by trust or foundation structures, and individuals residing outside of the respective EU jurisdiction.

If an entity passes all three gateway tests and is not carved out, it will need to meet three minimum substance requirements or rebut the assumption of being a shell in order to avoid ultimately being considered a shell. Entities ultimately qualifying as shells will be treated as tax transparent by EU member states and hence be denied access to double tax treaties with non-EU countries.


While hastened restructurings are not advisable until the directive has been adopted in a final version, owners and advisors of potentially affected EU entities should look at the scope of the impact and discuss possible adjustments to the structure or to the entity setup and governance. The question will ultimately not be if, but when ATAD3 will be implemented. It is also expected that the currently proposed provisions will not change dramatically before implementation. Further adjustments are expected once ATAD3 is applicable.


Switzerland not being an EU member state, Swiss Holding companies will be outside of the scope of ATAD3. It should be kept in mind that Swiss companies are not sheltered from domestic substance requirements for the application of double tax treaty provisions and even for domestic tax jurisdiction purposes. However, there is no objective substance test for Swiss companies and there are no annual filing or reporting duties to prove substance. The possibility to get tax rulings for Swiss holding companies and the generally accommodating approach of Swiss Cantonal tax authorities both reinforce domestic tax certainty. In addition, ensuring compliant substance for tax treaty application is usually easily achieved if the Swiss company is planned and administered by professional local service providers. Swiss holding companies are an attractive and effective alternative to EU or offshore holding companies, providing for certainty and stability for owners while being fully compliant with OECD, FATF and international regulatory standards.

By Jessica Schaedler
Leading Trust advisor

Capital Trustees




Corporate Information

Metrika AG
Zurich office: Bleicherweg 50
8002 Zurich, Switzerland.
Telephone No.: +41 (0)44 512 5004

Altdorf office: Rathausplatz 5
6460 Altdorf, Switzerland.
Telephone No.: +41 (0)41 510 2029

Lugano office: Via Somaini 10
6900 Lugano, Switzerland.
Telephone No.: +41 (0)91 210 5700

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