DAC6, formerly known as Council Directive EU/2018/822 of 25 May 2018, is an amendment to European Council Directive 2011/16/EU of 15 February 2011. DAC6 covers mandatory disclosure and automatic exchange of information between EU countries in the field of reportable cross-border arrangements. The regulatory thread anchored in DAC6 stems from Action 12 of the OECD`s Base Erosion and Profit Shifting project, which was completed in 2015 and aimed to inform each jurisdiction in a timely manner of the compliance and policy risks posed by aggressive tax planning. Under a recent European Union (“EU”) directive, the EU Disclosure Requirement System (“MDR”) imposes a reporting requirement for potentially aggressive tax planning schemes involving EU Member States (also known as “DAC6”). The Directive transfers responsibility for reporting to intermediaries established in the EU, which is interpreted broadly to include any person who drafts, markets, organises, makes available for implementation or manages implementation (or provides assistance, support or advice) a reportable cross-border agreement. These intermediaries typically include tax advisors, accountants, lawyers, consultants, trusts and banks that design and/or promote tax planning systems. The reporting obligation is transferred to the taxpayer concerned if no intermediary is involved or if the intermediary is domiciled outside the EU or if the intermediary is exempted from the reporting obligation because this would breach professional secrecy under national law. The policy was implemented in June 2018, but the first disclosures are not due until the end of August this year. However, we have to go back to June 25, 2018 to identify the agreements that can be declared and declare them in the middle of this year.
DAC6 introduces an obligation for intermediaries to disclose to their national tax authorities information on cross-border arrangements that meet certain criteria, as well as rules for the subsequent exchange of such information between tax administrations. According to the final text, as of July 1, 2020, all disclosures must be made within 30 days of implementation. As previously stated, the mandatory reporting requirements (MDR) for relevant intermediaries and taxpayers in the European Union entered into force on 25 June 2018 and must be implemented by Member States by 31 December 2019 to apply from 1 July 2020. Intermediaries are also required to carry out reportable transactions from 25 onwards. June 2018 and share this information with tax authorities by August 31, 2020. Council Directive (EU) 2018/822 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation aims to require the disclosure to tax authorities of cross-border arrangements concluded by intermediaries or taxable persons established in the EU and requires the automatic exchange of such information between EU Member States. On 25 May 2018, the Council of the European Union adopted a Directive on mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (Council Directive (EU) 2018/822). This EU disclosure requirement, known as DAC6, aims to increase transparency by requiring intermediaries and, in certain circumstances, taxpayers to report cross-border transactions that are considered aggressive tax planning. The law (No. 2018-898 of 23 October 2018) authorized the French government to adopt, before 24 October 2019, rules for transposing the DAC6 into local French law by ministerial order. Following a consultation process with the French Council of State, the corresponding ministerial decree was published on 22 October 2019. On 27 June 2019, an official Norwegian report (“NOU”) was published proposing to introduce mandatory disclosure rules in Norway.
The NOU is currently undergoing a public consultation process that runs until December 2, 2019. The proposal is broadly in line with DAC6 but contains some adaptations and exceptions. The NOU proposes to include both national and international agreements. The mandatory disclosure report is required within 30 days of the provision of the CRS avoidance agreement or opaque offshore structure by an organiser or, in the case of a service provider, within 30 days of the initial provision of the services. The briefing note shows that a legacy disclosure provision also applies to project proponents with respect to CRS avoidance agreements entered into on or after October 29, 2014. In this case, notification is required within 180 days of the entry into force of the disclosure obligation. Overall, at Jones Day, we believe that the implementation of this new reporting requirement would take a long time for taxpayers and, of course, intermediaries. And they will need to allocate additional resources for two main reasons. First, compliance with the rules of DAC6 to avoid penalties that can be severe depending on the jurisdiction. Reporting obligations under the EU tax reporting system DAC6 are now in force across the EU, with most Member States initially extending reporting deadlines by six months due to the Covid-19 pandemic. Compliance with the new disclosure and exchange of information requirements may lead to various difficulties related to differences in the legal structures of the Member States and difficulties in interpreting various provisions of the Directive, including the `principal benefit test` and the characteristics or `characteristics` that require disclosure of an agreement. Where possible, taxpayers should also receive a draft that intermediaries can submit to the competent tax authorities.
Through this approach, we believe that taxpayers can ensure consistency in these reports. This also brings us to the second major challenge, namely the need for a global domestic tax compliance policy, where taxpayers need to establish very clear rules about who is involved in the process, who should assess whether a transaction is reportable or not, who is responsible for a reporting decision and who will be responsible for the effectiveness of that reporting. In addition, organizations need to identify the person dealing with intermediaries so that things are done consistently. The Directive required each EU Member State to adopt and publish the laws, regulations and administrative procedures necessary for the transposition and implementation of DAC6. On 10 October 2019, the Austrian Act implementing DAC6 entered into force. Earlier, on 1 December, the President of Slovakia met with the President of Slovakia. In October 2019, the Slovak Act implementing DAC6 was signed and the mandatory disclosure requirements were transposed into Slovenian law on 22 June 2019. To learn more about each jurisdiction, check out our second special issue, Tax Flash. The EU Directive on mandatory disclosure, formerly known as Council Directive (EU) 2018/822 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation as regards reportable cross-border arrangements (`the Directive`), requires Member States to implement legislation requiring intermediaries and taxpayers to declare devices that affect certain “licence plates”. Information on these reportable arrangements collected by a Member State shall be automatically exchanged with other Member States which may be interested in the agreements. Let me explain what the rules of DAC6 are.
These are binding disclosure rules for tax arrangements that are perceived to be aggressive.