DAC6 Reporting Deadlines to Be Deferred Due to COVID19
The European Commission has proposed to defer by three months the reporting deadline for the EU’s DAC6, a directive that forces intermediaries to disclose to tax authorities any tax arrangement deemed to be aggressive in nature.
Prior to the deferral, all new arrangements containing any of the four hallmarks established in the regulation and starting on July 1st, 2020, would have to be reported within 30 days.
If the deferral is approved, this deadline will be pushed to October 1st, 2020, so any reportable arrangements appearing from July 1st to September 30th must be reported by October 31st, 2020.
As for historical arrangements—those occurring between June 25th, 2018, and June 20th, 2020—the original deadline was August 31st, 2020. This, in turn, would be pushed to November 30th, 2020.
Additionally, the EU reserves the right to extend these deadlines by an additional three months if it is deemed necessary.
As reported by International Adviser, according to the European Commission, “the severe disruption caused by the covid-19 pandemic in the activity of financial institutions and of the persons who are liable to report cross-border arrangements hampers the timely compliance with their reporting obligations under [Dac6].”
The Commission adds: “Financial institutions are currently faced with urgent tasks related to covid-19. Furthermore, financial institutions and the persons liable to report cross-border arrangements […] are faced with several work-related disruptions, primarily due to the remote working conditions because of the lockdown in most member states.”
In mid-April, a group of financial associations (including the Alternative Credit Council, the Association for Financial Markets in Europe, the Alternative Investment Management Association, The European Association of Co-operative Banks, the European Banking Federation, EFAMA, the European Forum of Securities Associations, European Savings and Retail Banking Group, Insurance Europe and Invest Europe) had reached out to the EU’s Commissioner for Economic and Financial Affairs, Paolo Gentiloni, requesting that the DAC6 reporting deadline be extended due to the ongoing pandemic.
As reported by Transfer Pricing News, in a letter sent to Gentiloni, the fiscal associations claim “the late enactment of domestic legislation by many member states and the lack of detailed guidance and reporting schema details, and the difference of interpretation of key notions between member states, timely implementation of the DAC6 reporting obligations was already challenging.”
The letter adds, “These concerns are materially exacerbated by the pandemic, which is affecting all aspects of our members’ operations and also the ability of governments, tax authorities, other intermediaries and taxpayers to prepare for the start of the reporting obligation. The impact of the crisis on our members is severe due to a reduction in workforce available as a result of restrictions on movement and childcare requirements due to school closures.”
“In addition, IT resources have been redeployed to support the unprecedented business continuity programmes on a global scale. The primary focus of our members is to maintain their core client and regulatory responsibilities,” the letter concludes.
This regulation, which came into force on June 25th, 2018, has been for the most part transposed into law at a local level by all EU member states.
According to Andra Caşu and Valentin Cretu of Ernst & Young in Romania, “most of the EU countries have either implemented the provisions of DAC6 into their national legislation or have issued a draft legislation in this respect, these being mostly aligned with the provisions outlined in the Directive.”
Caşu and Cretu also advise practitioners to start preparing for their DAC6 reporting obligations.
As presented in an article for the International Tax Review, their main tips include:
- “Develop an internal procedure for scanning through arrangements and identifying the ones that should be reported;
- Set clear responsibilities for specific persons in the organisation and ensure they are trained on how to recognise a reportable arrangement;
- Keep in touch with your consultants/intermediaries and establish who and what will report;
- Ensure detailed and complete documentation is available for each transaction.”