EU Mandatory Disclosure Regime

The Minister of Finance has issued a Decree providing guidance on key provisions of the Law on Administrative Cooperation in the Field of Taxation, implementing Council Directives (EU) 2018/822 of 25 May 2018 and 2020/876 of 24 June 2020 on the mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (“DAC6”). The Decree was issued after the Cyprus Tax Authority had already issued an announcement extending the deadline for submission of DAC6 reports without any penalties to the end of 30 November 2021.

Portugal transposed the EU DAC6 rules into law on 21 July 2021. This EU Directive covers the mandatory automatic exchange of tax information related to reportable cross-border arrangements. Following this implementing law, the Portuguese tax authorities (PTA) published guidelines on the practical implementation of DAC6 in Portugal. The PTA’s guidelines may create unexpected reporting obligations in Portugal for a ‘relevant taxpayer’ regarding cross-border arrangements when a Portuguese nexus exists.

The Cyprus Parliament recently approved the draft Bill amending the Law on Administrative Cooperation in the Field of Taxation, implementing DAC6.

Most of the EU Member States that deferred the DAC6 reporting deadlines due to the pandemic postponed them to February 28, 2021. Thus, the extended deadline for reporting cross-border arrangements satisfying at least one of the DAC6 hallmarks and whose first step was implemented on or after June 25, 2018 has passed.

Following the agreement of the EU/UK Trade and Cooperation Agreement (TCA) on Christmas Eve, to great surprise HMRC laid some amending regulations on 29 December 2020 which fundamentally change the application of EU MDR/DAC6 in the UK.

In our DAC6 Pulses we keep you informed about the implementation of EU MDR (aka DAC6) in the different EU member states. This edition focuses on the beginning of the DAC6 live reporting period for all territories, with the exception of Poland, Germany, Finland and Austria, that did not exercise the option to postpone the initial deadlines for the first reporting.

Join us on Wednesday, 23 September at 7pm for our US webcast: Tax Readiness: Are you subject to EU mandatory reporting (DAC6)?

In our DAC6 Pulses we keep you informed about the implementation of EU MDR (aka DAC6) in the different EU member states. This edition focuses on the optional deferral of DAC6 deadlines.

Read our EU Direct Tax Group (EUDTG) Newsalert on the final bill implementing DAC6 in Greek legislation voted by the Greek parliament.

On 7 July 2020 the Austrian Ministry of Finance issued draft guidance on the application of the EU MDR (aka DAC6) rules for stakeholder consultation.

UK regulations (SI 2020/713) introducing deferred DAC6 reporting deadlines for arrangements where the reporting trigger occurs on or before 31 December 2020 have been laid before parliament and will enter into force on 30 July 2020.

The German Ministry of Finance has announced that Germany will stick to the original DAC6 reporting timeline and will NOT be exercising the option given in the recent EU Directive to extend the reporting deadlines.

On 24 June 2020, ECOFIN agreed an amendment to DAC6, giving EU member states the option to defer EU mandatory disclosure regime (EU MDR) reporting deadlines due to COVID-19. HMRC has confirmed that the UK will defer reporting deadlines in accordance with this decision.

The European Council adopted — through Council Directive (EU) 2018/822, dated 25 May 2018 (DAC 6) — new reporting obligations in order to promote the automatic exchange of information in relation to reportable cross-border arrangements. DAC 6 is the sixth amendment to the original Directive on Administrative Cooperation (DAC) adopted in 2011. DAC 6 obligates intermediaries to report cross-border agreements that may be indicative of “potentially aggressive tax planning” to their respective national authorities. The scope of DAC 6 is wide, leaving it up to the European Union (EU) member nations to define what needs to be reported within the ‘hallmarks’ laid out in DAC 6.

Read our PwC EU Direct Tax Group Newsalert on the recent agreement reached by EU Member States on the optional deferral of DAC6 deadlines.

Read our EU Direct Tax Group newsalert on the revised draft law transposing DAC6 in Portugal.

Due to the COVID-19 pandemic, the European Commission (EC) published a proposal on May 8 for a Council Directive amending Directive 2011/16/EU on administrative cooperation in the field of taxation (DAC). The proposed Directive sets out deferrals of the reporting and exchanging of information deadlines for financial account information under DAC2 (EU Common Reporting Standard, or CRS) and for mandatory disclosure rules under DAC6 (‘EU MDR’). For a complete overview on DAC6, please refer to our PwC Insight.

Read our EUDTG Newsalert on the European Commission's proposals to defer the deadlines under DAC2/DAC6 due to COVID-19.

On 26 March 2020 HMRC shared draft guidance on the EU Mandatory DIsclosure Rules (EU MDR), also known as DAC6. They have stressed that it is in draft form only, and so may be subject to further changes. From our discussions with HMRC it has been clear that they would like EU MDR to be applied in the UK in a pragmatic and targeted way, and the draft guidance reflects this intention. However if you have reporting obligations in other EU countries, you will need to consider the regulations and guidance in those countries, which may well be different from the UK. HMRC is also considering whether the implementation of these rules, which are due to become fully effective from 1 July 2020, could be delayed due to COVID 19. The flyer below provides more information on the final UK regulations and draft HMRC guidance. We have highlighted below some of the key points from the draft guidance.

EU Member States have largely implemented the EU’s DAC 6 Directive on the Mandatory Disclosure Regime, in readiness for 1 July 2020. However, there are local variations in interpretation of the directive and these demand careful consideration by taxpayers and intermediaries. This article takes a closer look at the variations and offers practical insights on the impact.

The mandatory reporting obligation of DAC6 starts in less than six months, on 1 July. Knowing your own country’s laws & obligations is an important 1st step for DAC6 compliance - but it’s not enough. How should you prepare?

In our DAC6 Pulse updates we keep you informed about the implementation of EU MDR (aka DAC6) in the different EU member states. In addition, we periodically explain one of the key features (‘hallmarks’) of DAC6 and this edition focuses on Hallmark B.2.

Croatia has recently implemented Council Directive 2018/822 known as EU MDR (aka DAC6) in relation to reportable cross-border arrangements.

A Bill introducing DAC6 (EU MDR) legislation in Romania has been published in the Official Gazette.

The Gibraltar Government has recently published regulations to implement EU MDR (aka DAC6) as well as ATAD Article 5 (Exit Taxation) and ATAD 2 (which extends hybrid mismatch rules to third countries).

According to the EU Council Directive 2018/822 (DAC6), Member States should have adopted and published, by 31 December 2019 at the latest, the laws, regulations and administrative provisions necessary to comply with the Directive. This is the reason why December was a month full of DAC6 developments, details of which can be found below.

The Romanian Minister for Finance has invited public comments on a draft bill to implement mandatory disclosure rules pursuant to Council Directive (EU) 2018/822 (“DAC6 or EU MDR”).

Following a consultation over the summer, HMRC has introduced Regulations to implement EU Directive 2018/822 - known as the EU Mandatory Disclosure Regime (EU MDR) or DAC 6.

In this month's edition we explore more aspects of EU Council Directive 2018/822, which is the fifth amendment to the Directive on Administrative Cooperation (DAC), or simply DAC6 and disprove some of the misunderstandings ('myths') that may arise with regard to DAC6.

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.

On 27 November 2019 the Bulgarian Parliament adopted, on a first (preliminary) reading, the draft bill implementing the Council Directive 2018/822/EU of 26 May 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (the so-called “DAC6”) into the local legislation.

A draft bill implementing the EU Council Directive 2018/822/EU of 26 May 2018, also known as “DAC6 Directive”, was introduced in the Belgian Parliament on 26 November.

The EU Council Directive 2018/822 (DAC6) regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements. DAC6 aims at transparency and fairness in taxation by imposing mandatory disclosure requirements for certain arrangements with an EU cross-border element where the arrangements fall within certain "hallmarks" mentioned in the Directive and in certain instances where the main or expected benefit of the arrangement is a tax advantage

On 22 October 2019, the Cyprus tax authority (the CTA) invited public comments until 12 November 2019 on a draft bill implementing the EU Directive on the mandatory disclosure and exchange of reportable cross-border arrangements, also known as DAC6.

A legislative proposal implementing the EU directive on the mandatory disclosure and exchange of cross-border tax arrangements, also known as DAC 6, has been submitted to the Finnish Parliament.

On 17 October 2019, the Irish Minister for Finance published draft legislation as part of Finance Bill 2019 to implement mandatory disclosure rules pursuant to Council Directive (EU) 2018/822 (“DAC6”).

The French government recently adopted a Ministerial Order transposing into French law the EU Council Directive 2018/822/EU on cross-border tax arrangements (‘DAC6’ or ‘EU MDR’). DAC6 has been in force since June 25, 2018. The Order’s provisions take effect July 1, 2020, with specific transitional measures applicable to arrangements implemented between June 25, 2018, and June 30, 2020.

The Austrian Parliament recently passed a law implementing the EU Directive on the mandatory disclosure and exchange of cross-border tax arrangements, also known as DAC6.

Following publication of the UK EU Mandatory Disclosure Regime (EU MDR) draft regulations, an expert panel of PwC EU MDR specialists came together to record a live webcast and client Q&A. Listen to the recording below to find out what the key themes are and what they mean for business.

On 26 September 2019, the German Ministry of Finance published a draft proposal regarding the implementation of mandatory disclosure rules pursuant to the European Union Directive 2018/822/EU (DAC6).

A draft Law prepared by the Portuguese Government, aiming at implementing the EU Directive on the mandatory disclosure and exchange of cross-border tax arrangements, also known as DAC6, is currently under public consultation.

On 18 July 2019, the Estonian Ministry of Finance published draft legislation to implement EU MDR (also known as DAC6) which requires service providers (or, in certain circumstances, taxpayers) to report on cross-border tax planning arrangements that meet certain hallmarks. This draft bill must now follow Estonian legislative procedures and may be amended before final enactment, but the rules are expected to enter into effect in Estonia on 1 July 2020 (in line with the EU Directive) with arrangements implemented between 25 June 2018 and 30 June 2020 required to be reported by 31 August 2020.  Our specialists analyse the proposals.

Last week, draft UK regulations to implement EU Directive 2018/822 (DAC6) were published alongside a consultation document. DAC6 is an information reporting regime that requires intermediaries to disclose reportable transactions. For a transaction to be reportable, it must be cross-border and contain one of the hallmarks set out in Annex IV. Many of the hallmarks are only reportable if one of the main benefits of the arrangement is to obtain a tax advantage - the hallmarks related to the Common Reporting Standard (CRS) are not the same. This is why Hallmark D1 requires a different approach. Reporting under D1 is information reporting on arrangements that have the effect of circumventing the CRS information reporting regime.

The draft UK regulations follow DAC6 closely, and require disclosure to HMRC of cross border arrangements entered into by taxpayers which fall within certain hallmarks . These hallmarks are very broadly defined and many commercial transactions will be within the scope of the rules . The disclosures will be shared between the tax authorities of all EU Member States quarterly.

On 22 July 2019, HMRC published draft regulations and guidance to implement the EU Mandatory Disclosure Rules (MDR) in the UK.

We’re well into the transitional period for EU MDR, also known as DAC6. The clock started ticking back on the 25th June 2018, requiring businesses to record all EU cross border arrangements that fall within certain hallmarks, to the tax authorities. All reportable cross-border arrangements that originated in the period from 25 June 2018 to 1 July 2020 must be disclosed to HMRC by the 31 August 2020. How confident are you that people in your organisation understand the new EU MDR requirements and hallmarks? And can they identify and disclose reportable transactions correctly? Based on our experience, we’ve developed a five step approach to help you ensure your business is compliant with the requirements.

Restrictive and broad Mandatory Disclosure Rules („MDR”) have been implemented into the Polish tax system since January 2019. At the end of January 2019 Polish Ministry of Finance issued an official document explaining some of the aspects of MDR (“Explanations”). Non-Polish entities / individuals may have reporting obligations working as promoters/supporters or being the beneficiary. Not only advisors, but also group entities, asset/investment managers and other entities/individuals involved in dealing with Polish related arrangements may have to report tax schemes directly to Polish tax authorities. Moreover, those identified as promoters (may be any entity acting to the benefit of other group entities) are obliged also to have special internal procedure regarding mandatory disclosure rules. Non-compliance with those regulations is subject to sanctions up to EUR 5m. These sanctions can be applied to non-Polish individuals and not just entities.

The EU Council Directive 2011/16 in relation to cross-border tax arrangements, known as DAC6, has been in force since 25 June 2018. DAC6 aims at transparency and fairness in taxation. DAC6 applies to cross-border tax arrangements, which meet one or more specified characteristics (hallmarks), and which concern either more than one EU country or an EU country and a non-EU country. It mandates a reporting obligation for these tax arrangements if in scope no matter whether the arrangement is justified according to national law. Failure to comply with DAC6 could mean facing significant sanctions under local law in EU countries and reputational risks for businesses, individuals and intermediaries. Therefore businesses need to understand the importance and implications of the directive and the need to act now to ensure compliance by the deadline in 2020.

We’re now a few months in to the transitional period for the new EU Mandatory Disclosure Regime. These rules kicked in on 25 June this year and broadly require businesses or their advisors to report cross border arrangements which fall within certain hallmarks to the tax authorities. So how are businesses responding to the obligations placed on them under the rules? And what are some of the challenges?

On 24 September 2018, EU Member States dedicated the entire meeting of the European Commission (EC)’s Working Party IV to seeking more clarity from the EC concerning the interpretation of Council Directive 2018/822/EU of 25 May 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (commonly referred to as DAC6).

Do you understand the potential implications of EU MDR for your business? This flyer provides an overview of the rules.

These frequently asked questions provide more detail on the new EU MDR rules.

On 25 May 2018, the the Economic and Financial Affairs Council (ECOFIN) formally adopted rules regarding the mandatory automatic exchange of information in relation to reportable cross-border arrangements (commonly referred to as DAC6).

On May 25, 2018, the Economic and Financial Affairs Council (ECOFIN), which is responsible for European Union tax policy, formally adopted the Council Directive that amends Directive 2011/16/EU on administrative cooperation in the field of taxation with regard to mandatory automatic exchange of information related to reportable cross-border arrangements.

On 6 July 2018 HMRC published for consultation draft legislation under the heading "International tax enforcement: disclosable arrangements", together with a summary and draft notes.

New Polish legislation implementing EU mandatory disclosure rules (MDR) introduced by DAC6* will be effective from 1 January 2019 (18 months earlier than required under DAC6). The Polish legislation is much broader than DAC6, applying to both cross-border and domestic arrangements, and covering a wider range of taxes. There will be significant fines for failure to report or other non-compliance with the MDR. Anyone undertaking transactions involving Poland should consider the impact of the new rules.