A hallmark is defined as a characteristic or feature of a cross-border arrangement that presents an indication of a potential risk of tax avoidance, as listed in Annex IV of the Directive. The legislative proposal imposes mandatory disclosure (reporting) requirements for arrangements with an EU cross-border element that meet one or more of the listed hallmarks.
For certain hallmarks it is required that also the main benefit test (MBT) is met in order for the arrangement to be reportable.
An arrangement is reportable under E3 if it involves an intragroup cross-border transfer of functions and/or assets and/or risks, but only if the projected annual earnings before interest and taxes (EBIT), during the three-year period after the transfer, of the transferor or transferors, are less than 50% of the projected annual EBIT of such transferor or transferors if the transfer had not been made. Hallmark E3 is not linked to the MBT.