What is the importance of DAC6?
In May 2018 the EU Council Directive 2018/822/EU has amended the Directive 2011/16 on mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (hereinafter the “DAC6”). The DAC6 can be seen as a highly important amendment after the Common Reporting Standards (CRS), which provides for exchange of information between tax payers worldwide.
DAC6 requires mandatory disclosure of specific arrangements with an EU cross-border component in accordance with the criteria set out in the directive. The so called “intermediaries” are required to report, ie. “any person that designs, markets, organises or makes available for implementation or manages the implementation of a reportable cross-border arrangement is an intermediary.” The new EU rules can possibly impact any individual or entity which is involved in implementation of potentially aggressive cross border tax planning, these may include but are not limited to lawyers, banks, tax advisors and accountants based in the EU. As well as that, individuals and entities based in Switzerland and Liechtenstein may also be affected.
It is important to point out, that the manner in which the directive has been drafted can potentially impact standard transactions with no particular tax motives. All EU Member States are required to implement DAC6 into their national legislation by 31 December 2019.
The intermediaries must report the potentially aggressive tax planning arrangements to the tax authorities in the country where they are based, under the certain criteria, specifically if they fall within one of the “hallmarks” provided in the DAC6 and in certain instances where the main or expected benefit of the arrangement is a tax advantage. Penalties will be imposed in the event of non-conformity.
The information that will need to be reported is the following:
- Identification of all taxpayers and intermediaries involved, including
- Tax residence.
- Name, date and place of birth (if an individual).
- Tax Identification Number (TIN).
- Where appropriate, the associated persons of the relevant taxpayer.
- Details of the relevant applicable hallmark(s).
- A summary of the arrangement, including (in abstract terms) a summary of relevant business activities.
- The date on which the first step in implementation was or will be made.
- Details of the relevant national law.
- The value of the cross-border reportable arrangement.
- Identification of relevant taxpayers or any other person in any Member State likely to be affected by the arrangement.
In the light of the above, there is no safe harbour for arrangements having an underlying commercial purpose.
Up to 31.12.2019
DAC to be part of national legislation
One-off re porting(25 June 2018–30 June2020)Exchange (implicit) within a month of the end of quarter –latest 31 October 2020
First automatic exchange of information
Every 2 years after 01/07/2020
Evaluation of relevance of Annex IV(Hallmarks)
Mainstream reporting (post July 2020 schemes)
Within earliest of 30 days beginning on the day after scheme is “made available” for implementation; is “ready” for implementation, when “first step” in the implementation has been made
Within one month of the end of the quarter in which the information was filed. (first exchange by 31October 2020)