Shell company
Topic: Taxation: Direct and Indirect Taxes, GST and Global Tax Issues · NCERT: Beyond NCERT
Meaning
A shell company is a company that exists on paper but has no real business, operations or assets. It is used to move money through many transactions (layering), to evade tax and to hide who really owns something. India's Ministry of Corporate Affairs began drives to strike off such companies in 2017. Beneficial-ownership rules require companies to disclose the real people who own and control them.
Example
A businessman sends unaccounted cash through a chain of shell companies as "share capital" and "loans". It returns to him looking like legal investment money.
Don't confuse with
- Tax haven: a country or territory with very low or no taxes and strict secrecy. Shell companies are often registered in tax havens, but a haven is a place, not a company.
Related concepts
- Tax avoidance and tax evasion
- General Anti-Avoidance Rule
- Tax compliance
- Black money
- Money laundering
- Hawala
- Benami transaction