DAC6 – Germany

First considerations regarding the introduction of MDR for tax arrangements in Germany were already made in 2007 and were resumed in the years 2016 and 2017. However, these attempts did not result in legislature. Following initial discussion drafts of 30 January 2019 and 26 September 2019, a government draft was published on 9 October 2019 about the "Introduction of a law on the report of cross-border tax arrangements" (“Einführung einer Mitteilungspflicht für grenzüberschreitende Steuergestaltungen”). Containing slight amendments, the parliament agreed on the law on 12 December 2019 and the Federal Council approved it on 20 December.

How were the hallmarks and the main benefit-test (MBT) implemented?

In principle, the hallmarks were adopted without exception. The German implementation mainly deviates from the DAC 6 requirements in structural terms. For instance, the hallmarks are no longer subdivided into five subject parts, but into hallmarks linked to the MBT on the one hand and hallmarks directly triggering a reporting obligation on the other hand (standalone basis). Some slight deviations and clarifications can be found with respect to the hallmarks and the MBT (e.g. under certain circumstances, a tax advantage shall not be given if it arises in Germany and does not contradict the purposes of the law).

Does a legal privilege (confidentiality obligation) exist and how is it considered with respect to MDR?

A legal privilege exists for lawyers, auditors and tax advisors who mainly fall under the term intermediary and, hence, will mainly be subjected to reporting obligations. In case that an intermediary is subject to a confidentiality obligation, the obligation to report is subdivided. While the intermediary is always obliged to report data on itself as well as on the arrangement, reporting of user-related data is due by a second report to be filed by the user (i.e. the “relevant taxpayer”). Split up of the reporting process can be avoided if the user released the intermediary from its confidentiality obligation. On the other hand, both parties may also agree on shifting the whole report to the user.

What does the reporting obligation procedure look like?

The data to be reported is generally transmitted in two steps. Due to the confidentiality obligation, the obligation to report user-related data is not incumbent on the intermediary, but on the user himself. The user can release the intermediary from his confidentiality obligation, so that the intermediary is also able to directly transmit user-related information. Otherwise, the intermediary files an anonymous report, containing intermediary-related information as well as general information about the tax arrangement. Subsequently, the intermediary must immediately notify the user of its initial disclosure and provide the disclosure and the registration number assigned to the tax arrangement by the Federal Central Tax Office. Receiving this information, the user is obliged to report its own user-related information on the corresponding tax arrangement. A period of 30 days is granted for both the initial notification by the intermediary and the subsequent notification by the user, while the latter period begins after receipt of the data from the intermediary. If there is no intermediary who is subject to the reporting obligation, the reporting duty shall pass completely to the user.

The user must provide for the disclosure and registration number in its annual tax return. That obligation pursues to improve allowing the respective tax office to scrutinize tax arrangements during tax assessment process.

How is non-compliance sanctioned?

An intentional or negligent violation of the reporting obligation by the intermediary or the user can be punished with a fine of up to EUR 25,000. The obligation to report is violated if the report is submitted incomplete, incorrect, late or not submitted at all.

Are there other national particularities in the implementation of DAC6?

The German law contains provisions on the prevention of multiple reporting in different Member States with a notable deviation. In principle, the German rules are in line with DAC 6 insofar as an intermediary obliged to report the same tax arrangement in several Member States is exempt from the reporting obligation in Germany if he reports the tax arrangement in the other affected Member State. However, the German law does not provide a prioritization rule regarding the Member State in which the tax arrangement is to be primarily reported. Consequently, the state in which the report is filed is, under certain circumstances, subject to election of the person obliged to report. That can not only avoid compliance costs but might also provide for further optimization opportunities

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