The EU’s committee of permanent representatives of the member states governments (Coreper) has revised a proposal which would extend the tax reporting deadline set out in the Directive on Administrative Cooperation (Dac6).
Dac6 applies to all cross-border intermediaries and mandates that they report any such transaction or arrangement intended to achieve a tax benefit.
International Adviser reported in May that the European Commission had already proposed a three-month delay to the 1 July 2020 deadline.
According to law firm Baker McKenzie, the current proposal, if greenlighted, could be adopted at the discretion of each member state, meaning that businesses should stick to the original deadline to meet their compliance obligations, in case their country does not delay reporting procedures.
Compliance requirements
But what transactions fall under the directive’s remit?
The law firm said: “Under the wide-ranging Dac6 regime, intermediaries – such as tax advisers but in some cases extending to non-tax personnel – will have to report cross-border transactions going back to 25 June 2018 to EU tax authorities.
“The reporting obligation reverts to the taxpayer where there is no intermediary involved or legal professional privilege prevents the intermediary from reporting.
“Arrangements are in scope if they involve either two EU member states or one EU member state and a third state, and the transaction contains certain ‘hallmarks’ that suggest potentially aggressive tax planning.
“Failure to report could result in significant penalties, which vary considerably among member states and which, in limited cases, include criminal liability.”
Reporting amendments
The deadline deferral was part of the EU’s response to the covid-19 crisis, and the three-month extension originally proposed in May was not deemed adequate enough by some member states, which have now agreed on a six-month delay.
“However, the draft directive makes it clear that the deferral will be optional for member states,” Baker McKenzie warned.
And if they do choose to extend the deadline, the law firm said there will be amendments to the mandatory disclosure regime:
- The deadline for filing information regarding cross-border arrangements implemented in the period between 25 June 2018 to 30 June 2020 (originally 31 August 2020) will be postponed to 28 February 2021;
- The deadline for the first automatic exchange of information on reportable cross-border arrangements between member states will also be deferred to 30 April 2021 from 31 October 2020;
- Where a reporting obligation arises between 1 July 2020 and 31 December 2020, the period of 30 days for reporting begins on 1 January 2021 and, for all reportable matters arising in that period of six months, will end on 30 January 2021 – which becomes the new filing deadline for that entire period of six months; and,
- In the case of marketable arrangements, the first periodic report will have to be made by the intermediary by 30 April 2021 at the latest.
Implementation pending
If the implications of the coronavirus pandemic keep posing a risk to member states’ economies and public health, they are allowed to implement a further three-month extension to the deadline, the draft directive states.
Baker McKenzie added: “So far, Belgium, Luxembourg and Sweden have made announcements that they expect to adopt the deferral in full should the draft directive be agreed.
“The authorities in the UK have stated that they intend to wait until ‘the proposals are finalised’ before confirming how this will apply to the UK’s rules.
“The deferral must be unanimously approved by the Economic and Financial Affairs Council (Ecofin). A European Parliament opinion is also required and is expected by 30 June 2020.”
