The European Union require that you or your advisor file arrangements that qualify for mandatory disclosure with tax authorities. In this article we will give you some reasons as to why it is important for you as a multinational group with presence in the EU to keep track of arrangements which fall under the mandatory disclosure regime.
The EU Council Directive 2018/882/EU (DAC 6) provides for mandatory disclosure of information to tax agencies by intermediaries on “potentially aggressive tax planning schemes with a cross-border element.” The Directive is based on the BEPS OECD Action 12.
The Directive and filing obligation primarily concern intermediaries such as law firms and tax consultants. However, the primary filing obligation may in a number of circumstances fall on the multinationals who will then be obliged to file.
There are a number of circumstances where the multinational will have to file, such as:
It is important to stress that filing has to be done by all entities which are resident in the EU, which means that multinationals which are headquartered outside of the EU, but with European subsidiaries, fall within the Directive’s framework. The filing will in these cases have to be done by an EU entity within the group, potentially in many jurisdictions if you have arrangements in several jurisdictions. In addition, you have to keep track of local legislation as well since some jurisdictions have proposed to introduce domestic hallmarks to catch domestic arrangements not covered by the Directive.
Even if you are not obliged to file an arrangement and the obligation falls on an intermediary, you most likely would want to keep track of what information the intermediary will or has filed with the tax agency.
In some cases, you may want to be notified in advance before an intermediary files an arrangement. This could be important if the arrangement is complex where the intermediary might not have the whole picture. You may then want to review the information which will be available for the tax agency before it is filed in order to change any information which is not correct.
Most likely you would like to collect information that already has been filed with the tax agency. This requires a process where your advisors provide you with filed arrangements on a regular basis. This may require that you add a clause in the framework agreement with your advisors requiring them to provide you with all such data.
For those arrangements where you as a multinational are responsible for the filing, you need to set up a process for converting your data to the required filing format. The EU will release guidance on the EU filing format, however, there might be local deviations in some jurisdictions just like with the CbC reporting. Therefore, you need to make sure you can file in all relevant jurisdictions for your group since you might be required to file in the jurisdiction where the EU tax department(s) resides and in all EU jurisdictions where one of your tax payers (companies) resides if no intermediary exists or if a professional privilege applies.
Multinationals headquartered outside of the EU will have to file in each jurisdiction where they have a reportable arrangement even if the central tax department, residing outside of the EU, has been involved in the arrangement.
Considering the potentially extensive filing obligation, you need to make sure that you can convert your data to the required filing format of all jurisdictions where you may have to file arrangements. This is important to do as soon as possible since the 30 day filing deadline does not give much room for hiring an external consultant to help you with the conversion or to ask the internal IT department for help.
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