Luxembourg Tax authorities portal is almost ready for the reporting: myguichet.lu is open since the beginning of 2021 leaving only a few days for firms having implemented a reporting tool to test the accuracy and completeness of their generated reporting files in XML format. Some non-blocking bugs are still present but should be corrected rapidly increasing the user experience. An online form is also available for those who would like to (re-)encode all details of the reporting to be sent.
Up to 100 fields in the worst case scenario will have to be completed. Notwithstanding the fact that most of them are relating to the identification (role, address and Tax Identification Number!) of all stakeholders - Intermediaries, taxpayers, associated companies, affected persons - the real difficulty will be first to decide how to report : in one single reporting describing all the steps of a particular transaction or in several ones easing the readability and the transmission of proofs to other stakeholders in the process?
That decision will determine how the arrangement will be described and the determination of provisions in the law of the relevant member states affected. This part of the reporting is left to more expert tax people who will be in charge of condensing into one single field of max 4000 characters the essence of an arrangement (together with supporting legal provisions) that would have been described often in lengthy tax memos or step papers.
With that part dealt with, the efforts will then be concentrated on the big chunk of the reporting: all other reportable arrangements relating to the transitory period (from 25 June 2018 to 30 June 2020) will be reported by the end of February. While there is more time to report one should also pay attention to the volumes which should be much higher as the period is covering more than 2 years.
Last but not least point of attention is the additional reporting effort that will have to be performed by certain intermediaries or even taxpayers. Due to the fact that some intermediaries will be under the legal professional privilege the burden and the responsibility of the reporting will be shifted to them. They may receive from those exempt intermediaries a notification telling them that a reporting is probably due on their side leaving them an even shorter period of time to report. This also is currently happening as intermediaries situated in the UK following Brexit will no longer be required to report as most of the provisions of the DAC6 law have been repealed. As the EU nexus is still present the responsibility of reporting will then fall again on the taxpayer(s) or another intermediary in the chain.
A final recommendation will be to keep very carefully the proof of reporting: in Luxembourg an arrangement ID and Disclosure ID will be attributed to every reporting filed onto Myguichet. This may be asked by other tax authorities, intermediaries or taxpayers for their own files to document or check that all obligations have been fulfilled. As a reminder, in Luxembourg, failing to report on time could trigger penalties up to 250,000 EUR per breach of reporting...
While DAC6 is still not fully digested by market players, the EU Commission is already working on a new avatar of the DAC directive, the DAC7 which will deal with digital platforms. Member States will automatically exchange information on income generated by sellers on digital platforms. Crypto assets and e-money will also be in the scope of transparency. Stay tuned!
Partner, Tax Information Reporting Sàrl, PwC Luxembourg
Tel: +352 49 48 48 4031
Director, PwC Tax Information reporting Sàrl, PwC Luxembourg
Tel: +352 49 48 48 4618