As published on international-adviser.com, Wednesday 24 June, 2020.
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.
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.”
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:
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.”