One of the areas where we are currently seeing significant change concerns international disclosure requirements. Efforts are being made to improve tax transparency and to tackle aggressive tax planning, avoidance and evasion, including the signing of automatic exchange of information agreements to allow tax authorities of different countries to exchange information about financial accounts and investments.
A measure aimed at discouraging the use of aggressive cross-border tax-planning arrangements is EU directive 2018/822, which entered into force on 25 June 2018. This amended an earlier directive (2011/16/EU) regarding mandatory automatic exchange of information concerning taxation in relation to reportable cross-border arrangements. This is the sixth version of the EU Directive on administrative cooperation and is known as DAC 6.
Broadly, DAC6 applies to cross-border tax arrangements which meet one or more specified characteristics (hallmarks) as set out in Annex IV to EU directive 2018/822),and which concern either more than one EU country or an EU country and a non-EU country. If tax arrangements fall within the scope of these rules there will be a requirement to report, regardless of whether the arrangement is justified according to a particular country's 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.
The rules are due to become fully applicable from 1 July 2020. This broadly means that intermediaries and taxpayers will be required to file information with their national tax authority within thirty days of the first of the following dates:
- on the day after the reportable cross-border arrangement is made available for implementation; or
- on the day after the reportable cross-border arrangement is ready for implementation; or
- when the first step in the implementation of the reportable cross-border arrangement has been made; or
- (only when an intermediary is involved) when the intermediary provided aid, assistance or advice.
So given our position on Brexit, do the DAC6 requirements affect us?
While the UK is in the EU, and during the implementation period (which is due to end on 31 December 2020), the UK is obliged to implement DAC 6. 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.
However, as with many EU-related matters at present, it is still unclear what will happen at the end of the implementation period. So for now unfortunately, it's yet another case of 'watch this space'.
Sarah Laing is an author for accountingcpd. To see her courses, click here.