European Union: DAC6 Formally Adopted

On 25 May 2018, the Economic and Financial Affairs Council (ECOFIN) formally adopted the Council Directive amending Directive 2011/16/EU on administrative cooperation in the field of taxation as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements in order to disclose potentially aggressive tax planning arrangements (also commonly referred to as DAC6).

The main purpose of DAC6 is to strengthen tax transparency and fight against aggressive tax planning. The term aggressive tax planning is undefined, however, and instead, reference is made to a number of pre-determined hallmarks, which are features that could render a cross-border arrangement reportable under this Directive. DAC6 provides for mandatory disclosure of cross-border arrangements by intermediaries, or individual or corporate taxpayers, to the tax authorities and mandates automatic exchange of this information among Member States.

The DAC6 Directive

Scope: The adopted Directive applies to a cross-border arrangement which generally means an arrangement or series of arrangements concerning either more than one Member State or a Member State and a third country.

Reportable cross-border arrangement: For cross-border arrangements to require being reported to the tax authorities, at least one of the hallmarks must be met. These hallmarks may be generic or specific. As regards the generic hallmarks and a number of specific hallmarks, these may only be taken into account insofar as they meet the so-called "main benefit test". This test will be met if obtaining a tax advantage constitutes the main benefit or one of the main benefits a person is expected to derive from an arrangement.

Generic hallmarks include, for example, an arrangement or series thereof whereby the taxpayer is under the obligation to not disclose how such arrangement can secure a tax advantage vis-à -vis other intermediaries or the tax authorities or when the intermediary receives a fee for its services proportionate to the amount of the tax advantage.

Specific hallmarks include (but are not limited to) the trade in loss-making companies to reduce tax liability under certain conditions, conversion of income into lower-taxed revenue streams, circular transactions, and those relating to certain cross-border transactions, more specifically, deductible cross-border payments between associated enterprises in cases where:

  • the recipient is not resident for tax purposes in any jurisdiction, or
  • the recipient is resident for tax purposes in a jurisdiction levying corporate income tax at the rate of zero or almost zero, or
  • the recipient is resident for tax purposes in a jurisdiction which is included in a list of third-country jurisdictions which have been assessed by Member States collectively or within the framework of the Organisation for Economic Co-operation and Development as non-cooperative, or
  • the payment benefits from full exemption from tax in the jurisdiction where the recipient is resident for tax purposes, or
  • the payment benefits from a preferential tax regime in the jurisdiction where the recipient is resident for tax purposes.

Specific hallmarks which relate to some other cross-border transactions (deductions for the same depreciation, relief from double taxation in more than one Member State, material difference in the amount being treated as payable in consideration for the transferred assets in the jurisdictions involved), transfer pricing and automatic exchange of information and beneficial ownership, which do not need to comply with the main benefits test, are incorporated in the Directive.

Intermediaries: For the purposes of this Directive, an intermediary is defined as:

i) any person that designs, markets, organises, makes available for implementation or manages the implementation of a reportable cross-border arrangement, and

ii) any person that, having regard to the relevant facts and circumstances and based on available information and the relevant expertise and understanding required to provide such services, knows or could be reasonably expected to know that they have undertaken to provide, directly or by means of other persons, aid, assistance or advice with respect to the services mentioned above.

Next steps

The Directive will enter into force on the twentieth day following the date of its publication in the Official Journal of the EU (which is expected to happen shortly) and the first reportable transactions will be those where the first implementation step occurs between that date and 1 July 2020 (the date of application of the Directive). This information will then be required to be filed by 31 August 2020.

Member States must transpose the Directive into their national laws and regulations by 31 December 2019. The first automatic exchange of information should be communicated among Member States by 31 October 2020.

Key provisions

The intermediary must disclose information to the competent authorities on a reportable cross-border arrangement within thirty days beginning on the day after the arrangement is made available or is ready for implementation to the taxpayer or when the first step of such arrangement has been implemented.

To the extent that the intermediary is entitled to legal professional privilege (please note that the French version refers to secret professional which is different and of larger application than just the privilege of the legal profession as such) under national law, the disclosure obligation shifts to any other intermediary in the first instance or to the taxpayer in the absence of any other intermediary. Equally, wherever there is no intermediary required to report, including because the taxpayer implements a scheme in-house or the intermediary does not have presence within the EU, it is the taxpayer's responsibility to disclose such information within thirty days beginning on the day after the arrangement is available or is ready for implementation or when the first step of such arrangement has been implemented. In addition, taxpayers shall file information about their use of reportable arrangements in each of the years for which the arrangement is used.

Automatic exchange of information: Insofar as the intermediary files information on a reportable cross-border arrangement or series of arrangements, the Member State in which the information was filed will, by means of an automatic exchange, communicate that information to all other Member States. The automatic exchange of information shall take place every quarter.

Penalties: It is up to the Member States to lay down rules on effective, proportionate and dissuasive penalties for failure to comply with the provisions of this Directive.

Next steps



The Directive will enter into force on the twentieth day following the date of its publication in the Official Journal of the EU (which is expected to happen shortly) and the first reportable transactions will be those where the first implementation step occurs between that date and 1 July 2020 (the date of application of the Directive). This information will then be required to be filed by 31 August 2020.

Member States must transpose the Directive into their national laws and regulations by 31 December 2019. The first automatic exchange of information should be communicated among Member States by 31 October 2020.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions