DAC6: New EU Reporting Rules for Cross-Border Tax Planning Arrangements

The European Commission proposed new transparency rules on June 21, 2017, for EU intermediaries (including accountants, banks, lawyers and tax advisers) designing and promoting cross-border tax planning arrangements. The aim of the Commission was to tackle aggressive cross-border tax planning arrangements by the:

  • imposition of mandatory reporting of certain schemes to the tax authorities of EU member states; and
  • automatic exchange of information between them.

EU Directive 2018/882/EU entered into force on June 25, 2018. Under the directive (known as "DAC6"), an intermediary supplying a reportable cross-border arrangement bearing one or more specified characteristics, or "hallmarks", must disclose the scheme to the intermediary's tax authority within a 30-day turnaround period. The date of application of the directive is July 1, 2020. The directive contains a number of changes from the proposed rules.

Incorporation into domestic law

Member states need to adopt and publish domestic laws satisfying the requirements of the directive by December 31, 2019, and apply them from July 1, 2020. Despite Brexit, potential intermediaries and their clients should proceed on the basis that DAC6 will be implemented into U.K. law. The U.K. Government intends on giving HM Treasury powers in the Finance Act 2019 to enact the necessary regulations, and will consult on these in 2019.

“Catch-up” provision

A retrospective "catch-up" provision exists for reportable cross-border arrangements entered into between June 25, 2018, and July 1, 2020. Information on these cross-border arrangements must be disclosed to the tax authority by August 31, 2020.

Automatic exchange of information

Member states are required to automatically exchange reported information with all other member states, via a centralized database, within one month of the end of the quarter in which the information was filed. The first information is to be exchanged by October 31, 2020, and will include those arrangements caught retrospectively.

Planning points

Advisers should now review cross-border arrangements implemented from June 25, 2018, against the hallmarks set out in DAC6 to determine whether they are reportable, and also assess what systems are required to ensure compliance with the directive going forward.

It is important to note that failure by a tax administration to react to a reportable cross-border arrangement does not imply any acceptance of the validity or tax treatment of that arrangement. 

By Robert Walker, Technical Editor, Bloomberg Tax

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