Publish Date

Oct 14, 2022

SAFE: Tackling Non-EU Shell Entities and Enablers

Tax Insights

The European Commission is assessing support for EU-legislation to regulate tax intermediaries and at the same time tackle the abusive use of non-EU shell entities. The proposed mechanics aim to prohibit so-called ‘enablers’ from assisting with arrangements in non-EU jurisdictions that lead to tax evasion or aggressive tax planning impacting EU Member States. This publication describes the various policy options being explored by the European Commission and highlights the possible practical implications for the investment management industry.


The European Commission has launched a Public Consultation covering Policy Options to prohibit so-called ‘enablers’ from facilitating tax arrangements in non-EU jurisdictions that lead to tax evasion or aggressive tax planning impacting EU Member States. This is the European Commission’s response to requests from the European Parliament to improve the regulatory framework for tax intermediaries and it follows up on the European Commission’s announcement to tackle the abusive use of shell entities established outside the EU. The latter is fueled by the Pandora Papers – a tax-related scandal – which exposed how Russian individuals on the sanctions list have hidden wealth outside the EU. The initiative is referred to as SAFE, which stands for Securing the Activity Framework of Enablers.


The Public Consultation does not contain a legislative proposal (e.g., a draft EU-Directive), meaning very little is known at this stage. However, the European Commission has expressed that the term ‘enabler’ seeks to target persons ‘who design, market and/or assist in the creation of tax arrangements or schemes in non-EU countries that lead to tax evasion or aggressive tax planning for the EU Member States.’ Those familiar with DAC6 and the term ‘intermediary’ will recognize certain overlaps. It is therefore very well possible that the term enabler will not only capture tax advisers, but also a range of other service providers and in-house tax professionals. The European Commission has also announced that the legislative proposal will include clear and objective criteria for defining forms of aggressive tax planning that are prohibited. Given the EU’s jurisdictional limits, it appears that these mechanics will be used to tackle shell entities established outside the EU.


The policy options under consideration by the European Commission all have in common that enablers will be prohibited from facilitating tax arrangements in non-EU jurisdictions that lead to tax evasion or aggressive tax planning impacting EU Member States. The policy options include:

  1. Due diligence procedures – This would require enablers to carry out a test to check whether an arrangement leads to tax evasion or aggressive tax planning. It also requires the enabler to maintain records of this due diligence procedure.
  2. Due diligence procedures and mandatory registration – In addition to the due diligence procedure, this option will require enablers that provide tax services to EU tax residents to register in an EU Member State to be allowed to provide such services.
  3. Code of conduct – This option would require enablers to follow a code of conduct to ensure that they do not facilitate tax evasion or aggressive tax planning.


As a legislative proposal has not (yet) been published, the exact impact remains guesswork for the time being. However, it is very well possible that these policy options would ultimately impact a wide range of service providers due to a broad scope of the term ‘enabler’. In the investment management industry, this could theoretically include any party involved with investing and structuring past EU-borders (i.e., not only tax advisers, but also fund managers, investment managers and asset managers, as well as supporting corporate service providers). Whether industry specific carve-outs will be added remains to be seen (e.g., carve-outs for AIFs and AIFMs).

As risks of tax evasion and/or aggressive tax planning will need to be tested before assisting with an arrangement that includes a non-EU jurisdiction (e.g., the establishment of an entity outside the EU or investments into a non-EU jurisdiction, and vice versa), this could also mean that certain internal controls will need to be introduced to timely identify such arrangements, including a governance model to manage the connected compliance and required (technical) knowledge.

Defining aggressive tax planning is extremely challenging, as a line will need to be drawn between acceptable tax planning and aggressive tax planning, both of which are (currently) legal.


As witnessed with DAC6, which also targets aggressive tax planning arrangements, there can easily be overkill if the criteria used are too broad or generic. Moreover, depending on the criteria that the European Commission chooses to define aggressive tax planning, there may also be a challenge for enablers with the interpretation thereof (e.g., main benefit tests or undefined terms).


The current Public Consultation runs until 13 October 2022. The European Commission aims to adopt a final legislative proposal in the first quarter of 2023. This may be an EU-Directive or even a soft law approach. Such legislative proposal will be subject to another Public Consultation before it can be adopted by the European Commission. It is therefore to be expected that the first version of the legislative proposal will be published late 2022 or early 2023.


At this stage the impact of SAFE is unclear. A&M closely monitors the legislative developments regarding SAFE and will keep you updated as things progress. If you would like to exchange views or discuss, please feel free to get in touch with your usual A&M adviser, Roel de Vries or Nick Crama.