New EU mandatory disclosure requirements, commonly known as “DAC6”, have been introduced to require intermediaries and taxpayers to disclose reportable cross-border arrangements to the relevant national tax authority, which will then be automatically exchanged with tax authorities in other EU member states.
New reporting requirements
Starting from 25 June 2018, intermediaries and taxpayers resident in an EU member state are required to disclose reportable cross-border arrangements to tax authorities. The Directive applies to cross-border arrangements that involve a member state and either another member state or a third country. One of the five hallmarks set out below will also need to be met for the cross-border arrangement to be reportable. The rules apply to direct taxation so are mainly focused on corporate taxes and income taxes.
Member states must transpose the Directive into their national laws and regulations by 31 December 2019. Reportable cross-border arrangements that take place from 25 June 2018 to 30 June 2020 will need to be disclosed by 31 August 2020 to tax authorities of the relevant member state(s). The information will be automatically exchanged by each member state within one month of the end of the quarter in which the information was filed.
The Irish regulations were published in Finance Act 2019 on 17 October 2019 and passed into law at the end of 2019.
There are differences in approach by different EU member states. Therefore, it is important that intermediaries and tax- payers understand how they may be affected and put in place procedures to identify whether their cross-border transactions fall within one of the hallmarks.
Who needs to make the disclosure
- When there is an intermediary based in an EU member state, that intermediary will be required to make the disclosure.
- Where there are multiple intermediaries, all intermediaries are required to report unless they have evidence that the same information has been filed in another member state.
- Where an intermediary is subject to legal professional privilege, the reporting obligation lies with other intermediaries, or, if there are no such intermediaries, with the relevant taxpayer.
- If there is no intermediary to the arrangement or legal professional privilege applies to the intermediaries, then the obligation to report will lie with the taxpayer.