DAC6 mini-quiz:
Commissioner for Revenue publishes DAC6 guidelines
The Commissioner for Revenue (“CfR”) has published the Guidelines on the Mandatory Automatic Exchange of Information in relation to Cross-Border Arrangements (the “Guidelines”). The Guidelines are to be read in conjunction with the Cooperation with Other Jurisdictions on Tax Matters Regulations (Subsidiary Legislation 123.127) including any amendments thereto, transposing the provisions of Council Directive 2018/822 (“DAC6”) including any amendments thereto, into Maltese legislation.
Access Guidelines
DAC6: Extension of reporting deadlines
DAC6 requires the identification and reporting of cross-border arrangements involving at least one EU Member State and which feature one or more ‘hallmarks’ which are considered to be indicative of potentially aggressive tax arrangements.
The EU Parliament has recently voted in favour of an optional deferral (i.e. the deferral is at the option of each Member State) of the reporting deadlines set out in DAC6 (Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements).
This vote cleared the last procedural hurdle before the amended Directive was formally adopted and published in the Official Journal of the European Union on 24 June 2020.
On 2 July 2020, the Maltese Commissioner for Revenue issued a notice confirming that the first reporting deadlines will be deferred by six months. In terms of the amending legal notice (LN 315 of 2020) which was issued on 31 July 2020, the applicable DAC6 reporting deadlines were deferred as follows:
- for reportable cross-border arrangements the first step of which was implemented between 25 June 2018 and 30 June 2020, the filing deadline is 28 February 2021.
- for reportable cross-border arrangements where the triggering event for the reporting took or takes place between 1 July 2020 and 31 December 2020, the period of 30 days for filing information will commence on 1 January 2021.
We will be glad to assist you with the process of analysing the impact of DAC6 on your organisation.
Ready, set, go!
The DAC6 compliance marathon has just started
DAC6 sets out to strengthen transparency in the tax ecosystem. The Directive requires reporting very detailed information on a broad range of cross-border tax arrangements, down to the level of individual names involved. DAC6 compliance is a continuous marathon for taxpayers and it's part of the "new normal" of the tax ecosystem.
Where do you stand in this marathon? Are you a front runner? Or are you still at the starting line?
The DAC6 championship
Q1 of 5
Is DAC6 and its implications a topic discussed in your firm (i.e. via training calls)?
Q2 of 5
Are you aware of the important dates in regard to DAC6?
Q3 of 5
Have you analysed all business' activities in terms of DAC6 in order to identify areas of potential reporting obligations?
Q4 of 5
Do you have the reporting function covered?
Q5 of 5
Are you aware of the risks of failing in compliance with DAC6?
Result!
You are at the starting line!
You scored as a starter.
According to your answers DAC6 should be prioritised as a hot topic on your company's agenda without further delay.
Every business, particularly those with multiple cross-border tax arrangements should understand the importance and implications of the new notification requirements, as well as the need to act now to ensure compliance by the deadline in 2020.
Having a structured approach for analysing and identifying your own business activities thoroughly will prepare you for the DAC6 compliance marathon.
Mandatory reporting will be a continuous compliance obligation for taxpayers. Are you up for the challenge?
Result!
You are getting there!
With some extra preparations, you will be ready for the DAC6 compliance marathon.
According to your answers you have some understanding around the new notification requirements and the risks of non-compliance for your business. Although this may be a good starting point, it may not be sufficient for a DAC6-compliant future yet.
Having a structured approach for analysing and identifying your own business activities thoroughly will be crucial for succeeding in this compliance marathon.
Mandatory reporting will be a continuous compliance obligation for taxpayers. Are you up for running the extra mile?
Result!
You are a frontrunner!
Congrats, you are in great shape for the DAC6 compliance marathon!
According to your answers you understand the "new normal" that DAC6 has brought into the tax ecosystem and you prepare yourself accordingly.
Having a structured approach for analysing and identifying your own business activities thoroughly will be crucial to guarantee your success in compliance with DAC6.
Mandatory reporting will be a continuous compliance obligation for taxpayers. As a frontrunner of this year, have you established your strategy for a DAC6-compliant future?
The Maltese rules transposing the provisions of DAC 6
Legal Notice 342 of 2019 which was published on 17 December 2019 introduces the rules which transpose the provisions of the sixth update to Council Directive 2011/16/EU on administrative cooperation in the field of taxation into Maltese law (DAC 6 or the Directive).
The new rules reflect the provisions of the Directive and impose mandatory disclosure by certain intermediaries (and taxpayers, in specified situations) of defined cross-border arrangements.
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What’s DAC6 all about?
The EU is introducing an additional level of tax transparency in order to detect potentially aggressive tax arrangements.
The amendment to Directive 2011/16/EU on mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (DAC6 for short) has far-reaching consequences for tax advisors, service providers and taxpayers – including organisations and individuals in Malta.
DAC6 imposes mandatory disclosure requirements with respect to certain arrangements with an EU cross-border element where the arrangements fall within certain "hallmarks" mentioned in the directive and in certain instances where the main or expected benefit of the arrangement is a tax advantage. A mandatory automatic exchange of information on such reportable cross-border schemes is being introduced via the Common Communication Network (CCN) which will be set-up by the EU.
Although the directive is not effective until 1 July 2020, taxpayers and intermediaries need to monitor and collect data with respect to any cross-border arrangements which date back to 25 June 2018. Therefore the time to act is now.
How will this work?
Who is affected?
These new EU rules can potentially impact any individual or entity involved in designing, marketing, organising, making available for implementation or managing the implementation of potentially aggressive tax-planning arrangements (as defined in the directive) with an EU cross-border element as well as those who provide assistance or advice. Taxpayers, including individuals, legal persons (i.e. companies and foundations) and legal arrangements (i.e. trusts) can potentially also be affected.
The following are a few examples of persons who may be affected by the new EU rules when providing the aforesaid services:
- Maltese tax advisors (including sole practitioners)
- Maltese law firms and lawyers
- Maltese corporate services providers and trustees
- Maltese banks
When?
- 25 June 2018: date of entry into force of the Directive and commencement of transitional period
- 31 December 2019: Directive to be implemented into Maltese legislation by this date
- 1 July 2020: the date of application of the Directive
- 31 August 2020: first possible reporting deadline with respect to reportable transactions which occurred/ occurring between 25 June 2018 (the date of entry into force of the Directive) and 1 July 2020 (the date of application of the Directive)
- 31 October 2020: first quarterly automatic exchange of information by tax authorities of EU Member States
Why?
The main purpose of DAC6 is to strengthen tax transparency and the fight against aggressive tax planning. It broadly reflects the elements of action 12 of the BEPS project on the mandatory disclosure of potentially aggressive tax-planning arrangements as well as the OECD model regarding mandatory reporting of CRS avoidance schemes and opaque offshore arrangements.
What?
Mandatory reporting by intermediaries (or taxpayers) and the automatic exchange of information by the tax authorities of EU member states via the Common Communication Network (CCN) for a wide range of cross-border arrangements in relation to individuals and entities.
Which arrangements need to be reported?
DAC6 imposes mandatory disclosure requirements for arrangements with an EU cross-border element where the arrangements fall within certain "hallmarks" mentioned in the directive and in certain instances where the main or expected benefit of the arrangement is a tax advantage. There will be a mandatory automatic exchange of information on such reportable cross-border schemes via the Common Communication Network (CCN) which is being set up by the EU.
How?
The potentially aggressive tax planning arrangements with a cross-border element need to be reported by the intermediaries to the tax authorities in the country in which they are resident. The EU member states will then share the information with all other member states via the Common Communication Network (CCN) on a quarterly basis.
If the taxpayer develops the arrangement in-house, or is advised by a non-EU adviser, or if legal professional privilege applies, the taxpayer must notify the tax authorities directly.
Penalties
Penalties will be imposed on intermediaries (or taxpayers) that do not comply with the transparency measures. EU member states must implement effective, proportionate and dissuasive penalties.
How can PwC help?
Our team combines experts in tax, people, processes, data and technology. By bringing together these different skill sets, we can help you understand DAC6 and the broader tax policy context, and implement effective controls and processes to ensure that all reportable cross-border arrangements are proactively identified and managed.
Impact assessment: We can analyse your current and planned activities so as to help you understand the possible impact the directive may have on your reporting obligations.
Governance framework: We can help you develop a comprehensively documented governance framework to define roles and responsibilities with respect to the reporting obligations and to identify and manage risks.
Data management: We can support you in the effective and efficient collation, analysis and storage of reportable data.
Reporting: Using technology, we can assist you to fulfil multiple reporting requirements using the same data set and reporting mechanism in the required format, and with preparing the necessary paperwork.
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