DAC6 will make it mandatory for intermediaries (or taxpayers, if there is no intermediary or intermediaries subject to professional secrecy as defined by Member States’ domestic laws) to report cross-border transactions and arrangements to the tax authority, and will require the subsequent automatic exchange of information between the tax authorities of the EU Member States involved in those transactions.
Cross-border arrangements may be reportable if they meet at least one of the hallmarks set out in DAC6. These hallmarks may be generic or specific. Generic hallmarks and a number of specific hallmarks may only be taken into account if they meet the so-called “main benefit test”. This will be the case if obtaining a tax advantage is the main benefit, or one of the main benefits, that a person is expecting to derive from an arrangement.
DAC6 was published in the Official Journal of the European Union on 5 June 2018 and entered into force on 25 June 2018. The first reportable transactions will be those whose first implementation step occurs between that date and 1 July 2020, i.e. the date of application of the Directive. This information will then have to be reported to tax authorities by 31 August 2020, leaving only one month to collect and report information.
Member States must implement DAC6 into their domestic law by 31 December 2019, and the first automatic exchange of information among Member States will occur by 31 October 2020.
DAC6 includes a few significant differences compared to the BEPS Action 12 recommendations, some of which are likely to make the hallmarks difficult to apply and may lead to uncertainty.
In the absence of any further guidance from tax authorities on the interpretation and application of the hallmarks, and pending the implementation of DAC6 under domestic law, a prudent approach should be taken when tracking and collecting information on transactions whose first implementation step occurs between the date of entry into force of DAC6 and 20 July 2020.
Private Equity Leader, PwC Luxembourg
Tel: +352 49 48 48 3193
Director, PwC Luxembourg
Tel: +352 49 48 48 3054