When a multinational group set up a process to handle DAC 6 reporting there are a few considerations regarding why it is often important to be in control of the entire process, i.e. to keep the control in-house.
We have listed a few things which are important to consider when you implement your process:
- Identification of transactions is something which internal people have to make since the information is found in internal systems or documents.
- Identification of future transactions, where no advice yet has been provided, has to be identified by internal people.
- If you have transactions that change over time, the changes might trigger a reporting liability. An external party will seldom be able to catch these changes and thus you need to be in control in-house.
- In transactions where you have involved several external intermediaries, it is not always the case that each intermediary knows which other intermediaries have been involved. The internal tax department often has this information and thus needs to keep track of it to be in control of the filing process and who will file.
- If you have several intermediaries involved in a transaction, it is not always the case that they have the full picture and each intermediary might only hold information about the part of the transaction which they are working on. However, the in-house tax department often has the full picture and is able to collect all the information, both internally and externally found information. Thus, it is often easier for the tax department to be in control of the data collection and to make the decision on who should file, especially when there might be e.g. tax advisors and lawyers involved from different firms, where it will be easier and cheaper to coordinate the information collection and the decision on who should file in-house.
- When you file you should include a description of the transaction. This is an important part of the filing and thus you need to be in control of what information becomes available to the tax authorities. Therefore, many groups want to review all information before it is filed.
- Since the internal tax department most likely know all intermediaries involved in a transaction, it is easier for you to contact all intermediaries and provide proof of filing which all intermediaries most likely would like to collect.
- Some transactions which occur regularly in your group might be difficult to collect for an external party, e.g. transactions which happen in the treasury department or transfer pricing department. If you make acquisitions, these might be confidential and thus an external advisor might be prohibited from having access to this information and it has to be handled internally.
- When you have collected information on transactions and decide not to file a transaction, this information and the reason for filing is important to keep track of as well for future reference if this decision is later questioned in e.g. a tax audit.
- When you file a transaction, it is expected that you need to appoint a local person to do the filing and thus you need to be in control that there is always someone that can take care of the filing within the deadline.
Irrespective of how you decide to solve your MDR reporting, you need to be in control and involve internal people in order to be compliant. Your internal people need to be involved in all steps from:
- Identification to;
- Collection to;
- Review to;
- Decision making to;
I.e. even if you outsource part of the work you still need to have internal functions involved in the MDR process.
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