Companies & entities
ATAD III (Unshell) in Luxembourg: status of the project and holding company substance
ATAD III, known as "Unshell", is a proposed European directive against shell companies that was never adopted: the Council of the EU abandoned it in June 2025. The substance of a Luxembourg holding company nonetheless remains decisive under the rules in force today. The firm assesses your exposure on that basis.
In short
ATAD III is not in force. Proposed by the European Commission in December 2021 ("Unshell"), this draft substance test was never adopted: Member States stopped negotiating it in the Council in June 2025, and the Commission listed the formal withdrawal of the proposal in its 2026 work programme. It creates no obligation. A Luxembourg holding company remains subject to other rules: ATAD I and II, tax abuse of law, the anti-abuse clause of the parent-subsidiary directive, the principal purpose test of tax treaties and DAC6.
Responsible for legal content: Maître Cora Maglo, Avocate à la Cour, Liste I du Barreau de Luxembourg depuis 2009. · Applicable law: Luxembourg
Holding company substance review in Luxembourg: key points at a glance
| Item | What to know |
|---|---|
| Fees | On a quote basis. Depending on the number of entities and the complexity of the structure. |
| Indicative timing | The review is carried out within a few days; bringing substance up to standard is planned over the longer term. |
| Documents required |
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| Deliverables |
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The Unshell project provided for indicators ("gateways"): predominant passive income, a cross-border dimension and outsourced management. Without agreement among the member states, and because of its overlap with DAC6, it did not succeed. No obligation arising from ATAD III therefore applies to a Luxembourg company today.
Substance nonetheless retains a decisive evidentiary value: it determines access to tax treaties and to the EU directives where the tax authority or a court looks for abuse. Cerno Law Firm documents this substance on the basis of the law in force, without presenting an abandoned project as an obligation.
Holding company substance review in Luxembourg: when should you call on the firm?
You hold a holding company and want to know which substance rules genuinely apply, and which do not.
Passive holding structures whose effective management is remote from Luxembourg are the most exposed to inspections.
What happens if you do nothing?
The benefits of the parent-subsidiary regime, of the interest-royalties directive or of a tax treaty being called into question on the basis of abuse of law, an anti-abuse clause or the principal purpose test.
Insufficient or undocumented substance weakens the taxpayer's position during an inspection.
How does the firm step in?
A substance review based on the law in force: effective management, the competence of the directors, resources, decisions taken in Luxembourg, consistency with income flows.
Assembling a defensible substance file and monitoring European developments, in particular on DAC6.
Practice areas
When to call on the firm
- Review the substance of an existing SOPARFI.
- Prepare a holding company that is documented from incorporation.
- Document substance ahead of an inspection.
- Verify access to treaties for a cross-border ownership chain.
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FAQ
Frequently asked questions
Is ATAD III in force in Luxembourg?
No. ATAD III ("Unshell") never went beyond the stage of a European Commission proposal of December 2021. Without agreement, Member States stopped negotiations in the Council in June 2025 and the Commission announced the withdrawal of the proposal in its 2026 work programme; the fight against shell companies is to be pursued by other means, in particular an amendment of DAC6.
Must a SOPARFI still have substance?
Yes. Substance remains central to defending the parent-subsidiary regime and tax treaties against the rules in force: ATAD I and II (Luxembourg laws of 21 December 2018 and 20 December 2019), tax abuse of law, the anti-abuse clause of the parent-subsidiary directive and the principal purpose test of tax treaties.
How can substance be strengthened?
Dedicated premises, an active local bank account, a qualified resident director, decisions taken in Luxembourg and rigorous documentation.
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Founded in 2013; Maître Cora Maglo has been admitted to the Luxembourg Bar since 2009
- 2013
- independent firm
- 2009
- at the Bar since 2009
- 4,7/5
- 81 Google reviewsRead reviews
Expertise & authority
Ongoing review and analysis of Luxembourg and European case law
Avocate à la Cour, List I of the Luxembourg Bar since 2009
Trained at the London School of Economics, formerly at Clifford Chance and Bonn Steichen & Partners
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Had a consultation with Me Cora Maglo about my Luxembourg Blue Card application. She explained everything clearly: the process, timeline and documents I need, and helped me with my wife’s family reunification too. Honest and practical advice. I felt confident after talking to her.F. P.J’ai beaucoup apprécié le service de Maître Maglo : son sérieux, sa sympathie, son professionnalisme et sa disponibilité. Toujours répondu rapidement et clairement, avec des conseils pragmatiques, sans pousser à des procédures longues et coûteuses lorsqu’elles ne sont pas justifiées.N. W.Super assistance and great support! Highly recommend. All my questions were answered, Cora and her team kept me updated all the time. I will definitely reach out to them next time for my residency.T.They talk about us
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