DAC6: Mandatory Disclosure of Cross-Border Arrangements
TGS Innovised — De Voorwaarts
DAC6: when must a cross-border arrangement be reported?
Since 1 July 2020, the Netherlands has had a mandatory disclosure regime for certain cross-border arrangements. The obligation derives from a European directive, commonly referred to as DAC6, and was implemented in Dutch law by the Act implementing the EU directive on reportable cross-border arrangements. The purpose is easy to explain: tax authorities in the European Union want early insight into arrangements that may lead to tax avoidance. How it works in practice is less straightforward.
Why this may affect you too
Many business owners associate “reportable arrangements” with artificial tax planning by large multinationals. That picture is too narrow. The reporting obligation can also apply to an entirely commercial transaction that yields no tax advantage at all, for example a payment to an associated enterprise in certain countries outside the EU. A business owner with a foreign subsidiary, a permanent establishment abroad, or a family structure involving a foreign foundation or trust can quickly come within scope.
The essence in three questions
A reporting obligation arises when three conditions are met at the same time. There must be an arrangement. That arrangement must be cross-border. And at least one so-called hallmark must be present, meaning a feature that the legislator regards as indicating a potential risk of tax avoidance. For some of these hallmarks an additional test applies: whether obtaining a tax advantage is one of the main benefits of the arrangement.
Who reports?
In the first instance, it is not the taxpayer who reports, but the adviser or service provider involved in the arrangement. The law calls this party the intermediary. This may be a tax adviser, but also an accountant, bookkeeping firm, bank or trust office. Only where there is no intermediary with a reporting obligation does the duty fall on the taxpayer.
Act quickly
A report must be filed within thirty days. That period can already start running when advice is delivered, which may be before the client has even decided whether to follow the advice.
What does this mean for you?
If you have business or private interests in more than one country, it is advisable to consider whether DAC6 plays a role in every new structure, restructuring or cross-border transaction. In the in-depth articles below, we explain step by step how the assessment works, who must report, which deadlines apply and what happens if a report is not made.