6th Amendment to the EU Directive on Administrative Cooperation
DAC6 comes into effect on the 1st July 2020 and imposes reporting obligations on cross border arrangements (CBAs), relating to direct taxation, that contain at least one of the hallmarks listed in the EU Council Directive 2018/822/EU. VAT and other forms of indirect taxation are therefore excluded from the Directive. this is part of the Administrative Cooperation in (Direct) Taxation in the EU initiative.
A cross border arrangement is an arrangement that includes at least an EU member state and another jurisdiction, where at least ONE of the following conditions must be met:
- Participants not resident same jurisdiction; OR
- Participant/s simultaneously tax resident in 2 or more jurisdictions; OR
- Participant/s has PE in another jurisdiction where part or whole arrangement takes place; OR
- Participant/s carries on business in other jurisdiction where not tax resident and has no PE; OR
- Arrangement impacts on AEOI or identification of UBO or Transfer Pricing.
The term ‘arrangement’ is not defined. Our understanding is that any a transaction, contract, payments or receipt, and a series or a part or one step of these, and a corporate or entity structure, may be considered an arrangement.
The term ‘participant’ is not defined and should therefore be given the broadest interpretation as any person or entity being part of the CBA.
The first reporting period will be between the 1st July 2020 and the 31st August 2020 and the obligation is to report CBAs that occurred between the 25 June 2018 and the 30 June 2020.
As from the 1st July 2020 new CBAs coming into place will need to be reported within 30 days.
The objective of the amendment to the Directive is to provide information to the local tax authorities regarding tax optimisation strategies being advised upon, promoted and implemented by intermediaries in the European Union. This information will be shared with all other EU member states. The duty to report lies with all involved intermediaries and ultimately with the taxpayers. Examples of Intermediaries are Lawyers, Accountants, Trustees, Corporate Service Providers, Tax Advisors and Banks.
DAC6 is implementing the OECD Base Erosion and Profit Shifting (BEPS) Action 12 that aims to discourage aggressive tax planning. The new regulations impose heavy penalties for non-compliance and have substantially tightened disclosure requirements.
The depth and scope of this legislation and its impact on tax planning is unprecedented.
What DM Europe can do for you
We can assist you in identifying any reportable cross border arrangements hallmarks present in your, or your clients’, commercial processes with the objective of minimising the impact of DAC6 on the Malta business activity whilst still ensuring full compliance with the EU directive and the local regulations, implementing DAC6 under Maltese law.
Please contact David Marinelli should you wish to discuss any matter relating to Companies registered in Malta. Please click here for Our Services page.
