Counting Down to DAC6
The EU has introduced a new mandatory disclosure regime, known as DAC6.
It requires intermediaries (including tax advisers, accountants, lawyers and banks) who establish or advise on certain kinds of ‘cross-border arrangements’ to report extensive information about those arrangements to local tax authorities.
A series of principles, referred to as ‘hallmarks’, govern whether arrangements will trigger the DAC6 reporting requirements. In addition, where no intermediary is required to report, the burden of disclosure may instead fall on a taxpayer involved in the relevant arrangements.
Whilst the first reports are not due until summer 2020, the period covered by the potential reporting obligations looks back to June 2018. Accordingly, transactions that are being entered into now by taxpayers may trigger disclosure requirements in future. Once reports start to be made, taxpayers can expect enhanced information sharing between tax authorities and wide-ranging follow up information requests.
We anticipate that DAC6 will result in a significant increase in audits and assertions of tax underpayments by taxing authorities.
DAC6 means the Directive on Administrative Cooperation in the Field of Taxation (Directive 2011/16/EU, available here) as amended by Directive 2018/822/EU (available here).