DAC 6 is the latest update in a series of EU initiatives that relate to the automatic exchange of information regarding tax with the introduction of the Mandatory Disclosure Rules (MDR).

The objectives of the MDR are to obtain early warnings regarding potentially aggressive or abusive tax avoidance schemes; to identify these schemes and their users; and to act as a deterrent to reduce the promotion and use of tax avoidance schemes.

DAC 6 places the obligation on the intermediaries or taxpayers to disclose potentially aggressive tax planning arrangements and provides a way for tax administrations to exchange information on these structures. This includes the reporting of cross-border arrangements that fall within a set of ‘hallmarks’.

Penalties have been put in place

These hallmarks must be assessed in light of a main benefit test and thereafter reported within 30 days of the earlier of either the arrangement being made available to the taxpayer or to the implementation of the arrangement.

The scope of this directive covers all taxes, including local financial transaction taxes, stamp duties and insurance taxes, but excludes VAT, customs and excise duties and compulsory social contributions. Relevant EU taxpayers or their intermediaries have an obligation to report on any cross-border arrangements that fall within these hallmarks.

Penalties have been put in place and set out in the regulations for intermediaries or rele­vant taxpayers who do not comply with these obligations. ARQ can advise clients on the introduction of DAC 6 and its implementation.

The DAC 6 became effective in July 2020, and first reporting is on February 28, 2021, covering the period from June 25, 2018, to July 1, 2020.

For any further information or assistance in EU tax matters, e-mail ARQ Group partner David Borg on dborg@arqgroup.com.

David Borg, ARQ Group partner

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