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 into force for certain EU countries by mid-2020 (subject to an optional 6 month deferral), this represents one of the most significant changes for tax advisors, service providers and taxpayers in recent years.
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 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.
The directive initially provided a one-off reporting deadline in August 2020 for arrangements implemented between 25 June 2018 and 1 July 2020, with a 30-day rolling window for reporting new arrangements from then onwards. In June 2020, the European Council announced an optional six-month delay to reporting deadlines and exchange of information until the beginning of 2021. Certain member states have opted to implement this delay into domestic law whereas others are maintaining the initial deadline, resulting in differing reporting timelines across the EU.
Failure to meet these requirements and deadlines may result in financial penalties and reputational damage.
Download the DAC6 brochure to learn more.
We’ve designed our MDR Reporter tool to provide you with one place to go to address all of your compliance needs to help you meet the DAC6 regulations. MDR Reporter can act as a repository to track all potentially relevant arrangements, allow users to apply local rules to help determine whether reporting will be required and provide a simple process for seamless and efficient reporting. With the decision making process being documented in real time, MDR Reporter will also provide you with the audit trail you need for any subsequent investigation.
How can we help?
Deloitte is working closely with tax authorities and industry bodies to track implementation of DAC6 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 us.