The EU Council Directive 2018/882/EU (DAC 6) provides for the mandatory disclosure of information by intermediaries on “potentially aggressive tax planning schemes with a cross-border element.” This Directive is based on the OECD Action 12 base erosion and profit shifting project. Information is required to be reported to tax authorities and shared via a mandatory automatic exchange of information.
The first information must be reported by August 31, 2020. However, reportable transactions must be collected at present, starting from June 25, 2018.
Mandatory Disclosure Reporting (DAC 6) – a guide on practical challenges in your daily operations
Intermediaries’ challenges with Mandatory Disclosure Reporting (DAC 6)
Guide: Control of arrangements subject to mandatory disclosure reporting
Mandatory Disclosure Reporting (DAC 6) – why it matters for multinationals
A guide for implementing an MDR (DAC6) solution
DAC 6 is targeted at intermediaries, where an intermediary is defined as any individual or business engaged in the designing, marketing, organizing, making available for implementation or managing the implementation of, potentially aggressive tax planning arrangements with an EU cross-border element, as well as those who provide aid, assistance and advice. This will include tax advisers, banks, accountants, and lawyers, and does not include an exemption for in-house advisers. Where there is more than one intermediary involved in the same cross-border arrangement, all of the intermediaries are required to make a disclosure, unless an intermediary has proof that the same information has already been filed by another intermediary.
If the taxpayer:
then the taxpayer must notify the tax authorities directly. This will require that tax departments collect potentially reportable transactions, assess whether they are covered by the Directive, and make sure an intermediary has filed the transaction. If an intermediary has filed the transaction, you need to collect the information they have filed to be in control of what data has been made available to the tax authorities, and if no intermediary has filed a reportable transaction you need to file it yourself. This means that you need to be in control of all arrangements that could fall within the boundaries of the Mandatory Disclosure Regime.
At present, it is unclear in what format you should file each arrangement and you may have to file arrangements in many EU countries. However, it is expected that the format will be XML.
The challenge for intermediaries is slightly different from multinationals. The intermediary needs to implement a process within its organization with clear roles and responsibilities which reflects how your organizations is structured. This process should aim at appointing people who can report arrangements, people that are responsible for the assessment of the arrangements and people who will file it in the correct data format to the tax authorities. Considering the severity of the potential fines it may be advisable to establish where potential fines will hit the company which could increase the incentive to identify and report arrangements on time.
If you have more than a few reportable arrangements per year you will benefit from having system support in place for your organisation. A system could support filings in multiple jurisdictions, keep track of and notify you on filing deadlines per arrangement, facilitate collaboration/shared responsibility between advisors in several jurisdictions and provide you with a tool that keeps track of and makes your filings searchable over time. For the filing process you may have to convert the collected data for each arrangement into an XML file which could differ between jurisdictions, i.e. you have to be able to support multiple filing formats if you have operations in several jurisdictions. In addition, the filing deadline for each arrangement is 30 days which means that you may have to report arrangements continuously every month and have a process in place which supports this. A system which automatically can convert your arrangements into the required filing format will make the process faster and more secure compared to having an external IT company on stand by to help you with the conversion on short notice.
With the Mandatory Disclosure Module, you will be able to identify potential arrangements and gather the necessary information in order to ensure that an intermediary has filed the arrangement. If an intermediary has not filed the arrangement, you need to gather enough information to make a decision whether you as a taxpayer should file it yourself.
Note that there is an uncertainty as to which transactions should be included in the filing. Even though you might not have that many qualifying transactions, you must ensure that you have put a process in place to identify potentially qualifying transactions to evaluate if they should be registered and to avoid penalties, should a transaction be missed.
The module will support XML filing in multiple countries and will automatically create the XML file from the collected data.
Data quality is of great importance. Our solution has many built-in functions to increase quality and ensure that you are in control of the entire process. Furthermore, data can be collected at the source, which ensures the accuracy of the input.
Our solution is for everyone! It is flexible, and you can adapt to the needs of different organizations. The modular approach together with configuration and customization possibilities allows you to get a solution that is relevant for you.
A good user experience is a key part of our solution. We help both editors and process owners by providing simple and clear processes and functions to minimize administration. Our interface is simple to use and has a consistent structure throughout all the modules.
As everyone has already been assigned roles and responsibilities with tasks to perform, your organization will save a lot of time by automating the data collection process. The collected data is always up to date which avoids work being done twice, and helps to minimize costly mistake with human data entry.
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