New Directive significantly broadens range of reportable cross border transactions
The EU Tax Intermediaries Directive is designed to strengthen the hands of tax authorities in identifying and responding to 'potentially aggressive tax arrangements' across the union. Deloitte Tax Director Niamh Gaffney outlines what it means for tax, accountancy and law firms with clients that engage in cross-border transactions.
She points out that although details of relevant transactions do not need to be reported to the Irish Revenue before 2020, the details of transactions which fall within the scope of the Directive from 25 June 2018 onwards must be recorded and stored, ready for reporting.
The EU Tax Intermediaries Directive became effective in 25 June 2018. It requires EU Member States to enact domestic legislation requiring taxpayers or their advisors (intermediaries) to disclose details of certain cross-border arrangements to their local tax authority. The Directive also provides that these details can then be shared by the local tax authority with their European counterparts.
The purpose of the Directive (which is a response to OECD BEPS Action 12) is to allow Member States’ tax authorities to obtain comprehensive and relevant information about 'potentially aggressive tax arrangements,' with a view to allowing the authorities to close loopholes, undertake risk assessments and/or carry out tax audits.
Although the Directive is similar in some respects to Ireland's existing domestic mandatory disclosure regime, there are some significant differences. The categories of reportable transactions covered by the EU Directive are very broad, covering diverse arrangements, some of which do not have any tax motivation. It is widely envisaged that a very significant number of transactions may become reportable annually to the Irish Revenue Commissioners once these provisions take effect. Reporting will be a likely occurrence for many organisations and taxpayers.
The Directive must be enacted into Irish domestic law by 31 December 2019, with first reports due on or before 31 July 2020. However, due to its retroactivity, the Directive is relevant immediately. With only the Directive itself to guide us until the Irish legislation is enacted, Irish taxpayers and their advisors alike must now actively consider the application or otherwise of this Directive to all cross-border transactions and arrangements and take action accordingly.
This article was previously published in Finance Dublin.