The European Commission has proposed a deferral to certain deadlines for filing and exchanging information regarding cross-border transactions under the Directive on Administrative Cooperation (Dac6).
The measure stems from the challenges presented by the outbreak of covid-19, which could see member states being granted an extension of up to three months on their reporting obligations.
But the directive will come into force on 1 July 2020 as scheduled.
“Based on the proposed changes, member states will have three additional months to exchange information on financial accounts of which the beneficiaries are tax residents in another member state,” the Commission said.
“Similarly, member states will have three additional months to exchange information on certain cross-border tax planning arrangements.
“Depending on the evolution of the coronavirus pandemic, the Commission proposes the possibility to extend the deferral period once, for a maximum of three further months.
“The proposed tax measures only affect the deadlines for reporting obligations,” it added.
Shifting deadlines
This means that taxpayers and intermediaries will need to disclose cross-border transactions that took place from 1 July 2020 to their national tax authorities, but they will have until 31 December 2020 to do so.
Similarly, the exchange of information for such arrangements between EU jurisdictions will start on 31 January 2021.
In addition, Dac6 sets out that any eligible cross-border transaction that happened between 25 June 2018 and 30 June 2020 had to be reported by the first deadline; but that period has been amended to arrangements which will take place between 31 August 2020 to 30 November 2020.
The Commission said: “The severe disruption caused by the covid-19 pandemic in the activity of financial institutions and of the persons who are liable to report cross-border arrangements hampers the timely compliance with their reporting obligations under [Dac6].
“Financial institutions are currently faced with urgent tasks related to covid-19. Furthermore, financial institutions and the persons liable to report cross-border arrangements […] are faced with several work-related disruptions, primarily due to the remote working conditions because of the lockdown in most member states.”
‘Urgent and coordinated response’
But financial services firms are not the only ones affected, as many tax authorities have been under pressure as well.
The Commission continued: “The capacity of member states’ tax administrations to collect and process the data is negatively affected. This situation requires an urgent and coordinated response within the Union.
“For this purpose, it is necessary to defer the time limit for the exchange of information on financial accounts of which the beneficiaries are tax resident in another member state in order to allow member states to adjust their national time limits for the filing of such information by the reporting financial institutions.
“In the same vein, the time limits for filing and exchanging information on cross-border arrangements […] should also be extended.”
