EU Directive 2018/822 of 25 May 2018 (mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements) amends for the sixth time Directive 2011/16/EU on administrative cooperation in the field of taxation (“DAC 6”) and requires the disclosure of information relating to certain cross-border arrangements (“CBA”).
The main objective of DAC 6 is to strengthen tax transparency and prevent what are considered to be harmful tax practices through the automatic exchange of information between the EU Member States on potentially aggressive tax planning. The UK Regulations will require any CBA involving two countries, where at least one is an EU Member State (considered to include the UK) to be reported where it meets certain criteria (referred to as the “Hallmarks”) that could indicate aggressive tax planning – these are known as a reportable CBA, or “RCBA”. The obligation to disclose such an arrangement will be on an intermediary involved in the arrangement. Although classed as intermediaries, lawyers will usually be exempt from submitting a report due to legal professional privilege.
On 8 May 2020, in response to the global pandemic, the European Commission published a proposal to delay disclosure deadlines imposed by DAC6 by three months but it should be noted that the proposal only defers the reporting deadlines, the beginning of the application of DAC 6 remains 1 July 2020. Professional advisers will need to be alert to DAC6 and clients will notice amended terms of engagement and a new focus from the outset on these new compliance obligations as penalties for non-compliance can be up to £1 million in serious cases.
