We have pulled together a document for ease of use of for our clients outlining the key points for consideration around Council Directive (EU) 2018/822 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (so-called “DAC 6”).
In principle, DAC6 requires intermediaries or (in certain circumstances) taxpayers to report certain cross-border tax planning arrangements which are considered to be aggressive, so that this information can be exchanged between the tax authorities of the Member States of the European Union.
An arrangement can be interpreted as a transaction, scheme, action, operation, agreement, etc. It may comprise more than one step.
DAC6 has been implemented into national laws of EU Member states by way of regulations, laws and decrees that entered into force on 1 July 2020.
Intermediaries (or taxpayers if there is no intermediary or if the intermediary is exempted from his/her reporting obligations because of legal professional privilege) will be required to disclose relevant arrangements to the local tax authorities where the first implementation step was taken after 25 June 2018. There is, therefore, an element of retrospective application with reporting obligations in respect of reportable transactions, the first step of which was implemented between 25 June 2018 and 30 June 2020, to be made by 28 February 2021 at the latest.
DAC6, and national laws implementing DAC6, are written in a very broad language with only few definitions of the terms and concepts used in there. A wise interpretation will be key. Intermediaries face plenty of issues when reviewing structures in light of DAC6 obligations. As reporting obligations may be shifted to taxpayers, they will also have to handle DAC6 complexity.
So DAC6 is currently an obscure maze. Investment and acquisition structures are complex and involved involve multiple participants and intermediaries located in different jurisdictions. Getting out of this maze requires cutting through complexity to understand your reporting obligations.
You will need to consider if there a reporting obligation under DAC6 and, if so, who should report, when, what and where. Answering these questions requires an in-depth knowledge of DAC6 and its mechanisms as well as an efficient internal procedure in place.
Prior to Covid-19 and the impact it has had, intermediaries (or, as the case may be, taxpayers) had until the 31st August 2020 to disclose reportable cross border transactions - the first step of which was implemented between 25 June 2018 and 30 June 2020. This has now been pushed back to the 28th February 2021. Similarly the timescale on the first disclosure obligations of reportable cross-border arrangements, for which the first step of implementation occurs between the 1st July 2020 and the 31st December 2020, has moved from the 3Oth July 2020 to the 30th January 2021.
In order for a cross-border arrangement to qualify as "reportable" within the meaning of DAC6, this arrangement must fall within one of the hallmarks provided by DAC6. There are a number of hallmarks to consider. These are divided into categories and each has their own set of considerations.
We have a specialist team of tax experts across Europe who are able to help you with any aspect of DAC6 and any other tax related questions. We have already advised a number of clients on DAC6 and would be happy to assist in any way we can.
We also have a general team of experts who are able to advise on various aspects of risks that our clients face.
