Background to the DAC6 Directive
The DAC6 Directive (EU) 2018/822 requires Member States to impose compulsory reporting obligations on intermediaries and taxpayers in relation to cross-border tax arrangements.
The policy that lies behind this legislative proposal is to ensure that the fiscal authorities are made aware of the implementation of any potentially aggressive tax arrangements at an early stage.
When is a tax arrangement classed as reportable?
For the time being, the reporting obligation applies to arrangements that involve a tax type covered by the EU Mutual Assistance Act (“EUAHiG”), which is the piece of legislation transposing Directive 2011/16/EU into German law. The affected types include, in particular, income tax, corporation tax, trade tax, and inheritance and gift tax. VAT is exempt.
For the purposes of tax compliance, it is advisable to have comprehensive documentation of even those transactions that are not deemed reportable. The content and scope of the data to be transmitted, as well as the sanctions in the event of non-reporting or false reporting, vary from one EU country to another depending on national legislation.
Who has an obligation to report?
The reporting obligation applies primarily to those known as “intermediaries”. This can be anyone who:
- Is involved in designing and/or implementing the cross-border tax arrangement in an advisory capacity
- Markets the arrangement
- Designs or organises the arrangement for a third party
- Makes the arrangement available for use or manages its implementation by a third part
The term “intermediary” is not restricted to a specific occupational group; rather, in Germany, it includes the following and more:
- Tax consultants
- Business consultants
- Representatives of the financial and insurance sector
Where the intermediary is legally obliged to maintain confidentiality, certain parts of the reporting obligation may be transferred to the user of the cross-border tax arrangement. However, according to the German draft bill, the intermediary always has an obligation to disclose general information about the cross-border tax arrangement as part of an “initial report”, with the actual user being required to initiate the disclosure of user-specific information subsequently in the form of a “second report”. However, the user must be given the option of releasing the intermediary from their confidentiality obligation so that the intermediary is able to report all the data. In cases where the user implements a reportable cross-border tax arrangement without the involvement of intermediaries (in-house arrangement), this user is responsible for reporting the information in full.
When must the report be sent?
In principle, the report has to be sent within 30 days of the deadline-triggering event specified in Section 138f (2) AO.
The reporting deadline applies to all cases whose first implementation step occurs on or after 1 July 2020. In cases where implementation began at any point between 25 June 2018 and 1 July 2020, the information must be reported by 31 August 2020.
As well as retrospectively processing any arrangements you have implemented previously, we also recommend carrying out further preparations by July, firstly by undertaking an impact analysis and secondly by aligning your internal processes – and, in turn, your associated compliance obligations – with the law.
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The DAC6 regulatory system has international implications, making it difficult to maintain a purely national outlook. Mazars can oversee and provide support for all DAC6 projects internationally via its European DAC6 Task Force.