Due to Covid-19, EU Member States can delay the implementation of the Directive on Administrative Cooperation (DAC6).
Due to the Covid-19 pandemic, the European Council agreed to allow Member States to delay implementation of the Directive on Administrative Cooperation (DAC) in the area of taxation. This was due to come into force as of 1 July 2020.
DAC6 applies to cross-border tax arrangements, which meet one or more specified characteristics (hallmarks) which can be identified as potentially indicative of aggressive tax planning. This may concern either more than one EU country or an EU country together with a non-EU country.
Under this new directive, businesses will have to report these cross-border tax arrangements regardless of the fact of whether it is justified in accordance with national law. Failure to comply with DAC6 could mean facing significant sanctions under local law in EU countries as well as reputational risks for businesses.
The Council adopted an amendment to the DAC allowing Member States an option to defer by up to 6 months the time limits for the filing and exchange of the following information:
- Automatic exchanges of information on financial accounts of which the beneficiaries are tax residents in another member state;
- Reportable cross-border tax planning arrangements.
The majority of Member States have implemented this new amendment for deferral into local legislation. Businesses that have cross-border tax arrangements in place should make themselves aware of the the reporting requirements of DAC6 together with the various categories of the hallmarks to determine if they have any reporting requirements.