DAC6: EU Mandatory Disclosure Regime has been saved
DAC6: EU Mandatory Disclosure Regime
New tax transparency initiative increases reporting requirements
The EU is introducing a new regime to increase the level of transparency surrounding potential loopholes and harmful tax practices. With stricter disclosure applicable from June 2018 and entering fully in force by mid-2020, this represents one of the most significant changes for tax advisors, service providers and taxpayers in recent years.
Deloitte's MDR Tool offers a solution to capture arrangements, ensuring that the data aligns with local requirements, and integrating with reporting.
The sixth version of the EU Directive on administrative cooperation (DAC6) aims to provide Member States tax authorities with additional information in order to assist them to more rapidly close perceived loopholes in tax legislation and harmful tax practices. Taxpayers and intermediaries entering into or advising on cross border arrangements involving EU jurisdictions will need to monitor where reporting will be required and disclose as necessary.
Who does it affect?
DAC6 requires EU intermediaries to file information on reportable cross-border arrangements (“RCBAs”) to their home tax authorities. Where no EU intermediary is involved or the intermediary asserts legal professional privilege, the reporting obligation will fall instead to the EU taxpayer. Failure to comply will result in penalties.
The definition of an intermediary is broad, capturing lawyers and advisers, and is expected to apply to banks, trustees, insurance companies, asset managers and other service providers.
Such intermediaries will be required to report on RCBAs that involve at least one EU Member State, where certain ‘hallmarks’ are met.
EU countries had until 31 December 2019 to implement local reporting requirements.
The directive provides an initial one-off reporting deadline in August 2020 for arrangements implemented between 25 June 2018 and 1 July 2020. However, following the COVID-19 outbreak, the EU commission allowed Member States to defer the DAC6 reporting deadlines, with the new date set on 28 February 2021 for arrangements in which the first step of implementation has taken place between 25 June 2018 and 30 June 2020. As of 1 January 2021, a 30-day rolling window for reporting new arrangements will apply (including arrangements where a reporting requirement is triggered between 1 July 2020 and 31 December 2020 ).
Most EU Member States, including Belgium, have opted for applying the new deferred deadlines.
From then onwards, a 30-day rolling window for reporting new arrangements will apply.
Failure to meet these requirements and deadlines may result in financial penalties and reputational damage.
How can we help?
Deloitte is working closely with tax authorities and industry bodies to track implementation of DAC 6 across the EU. While additional clarifications will be needed in order to implement the rules, there are certain steps that businesses should be planning for now:
Strategy: Mobilising your business’ response to the requirements, discussing policy and raising awareness at board level and establishing a plan for efficient compliance.
Impact assessment: Identifying transactions or structures potentially affected by the hallmarks and considering where reporting responsibility will reside.
Technology: Selecting a solution for capturing arrangements that aligns with local requirements, and integrates with reporting.
Training: Raising awareness within the business though eLearning modules as well as bespoke training programmes.
Monitoring: Tracking regulatory changes and to make the relevant source information accessible to affected intermediaries and taxpayers.
To discuss the implications of DAC6 on your business in more detail, please contact your regular Deloitte consultant or any of the below experts.
Annelies Dieusaert, email@example.com, +32 2 301 82 81
Pascal Van Hove, firstname.lastname@example.org, +32 2 600 67 70
Emmanuel Brehmen, email@example.com, +32 2 600 66 79
Nicolas Engelmann (Deloitte Legal), firstname.lastname@example.org, +32 2 800 70 39
Pieter Van Dyck, email@example.com, +32 2 800 25 65