A welcome delay to the EU DAC6 commencement provisions is proposed by the European Commission

Fri 15 May 2020

This article discusses a potential delay to the commencement of EU mandatory disclosure of reportable cross border arrangements and some practical points around identifying the person with the obligation to report and the UK reporting system.

Possible delay to commencement

Currently the UK regulations implementing the EU mandatory disclosure of reportable cross border arrangements requires reporting:

• by 31 August 2020 of all reportable arrangements for which the first step was taken between 25 June 2018 and 1 July 2020, and
• within 30 days of a reporting trigger for reportable arrangements from 1 July 2020.

In response to these impending commencement deadlines, the European Commission is proposing an amending directive in light of the Covid-19 pandemic (see here, and here) to:

• defer the transition reporting deadline (covering arrangements with a first step between 25 June 2018 and 1 July 2020) from 31 August 2020 to 30 November 2020, and;
• defer the commencement of the 30 day reporting deadline from 1 July 2020 to 1 October 2020.  In practical terms this means the first report due on 30 October 2020 will cover reportable arrangements where the first step was made between 1 July 2020 and 30 September 2020, as well as arrangements where the first step in the arrangement was taken on 1 October 2020;
• defer the dates for the first automatic exchange of information between EU member states from 31 October 2020 to 31 January 2021.

In the event of exceptional circumstances whereby the Covid-19 pandemic persists and member states are forced to implement lockdown measures the EU is also proposing a facility for extending the deadlines once more for a maximum of up to three months. 

The EC’s proposal still has to be approved by the EU. For any delay to be effective in UK law, an amendment to SI 2020/25 would be required.

If enacted, this would be a welcome delay to the commencement rules.  This delay would provide further time for businesses to review historic activity to determine if there are any reportable arrangements, and give further time to set up appropriate identification and reporting procedures.  Despite the many demands on businesses in the current environment, we still recommend preparations for this new reporting requirement should continue, particularly as analysing historical transactions may be quite an onerous task for companies with multiple cross-border transactions, or complex arrangements, and whether it is possible to rely on a report to be submitted by any other person involved in the arrangement.

Identifying the person with the reporting obligation

IIt is important to identify who has the primary reporting responsibility and in which jurisdiction.  In cross border arrangements with taxpayers and advisors located in different jurisdictions, where different local rules may apply, this can be complex.  Whilst the primary reporting obligation lies with an intermediary to a reportable arrangement, if the arrangement is not reportable in the intermediary’s home jurisdiction, they cannot be an ‘intermediary’ for the transaction.  This may leave taxpayers with an obligation to report in their home jurisdiction if no other ‘intermediaries’ are involved.  In any case, taxpayers will be keen to have oversight of what information is being reported on their behalf and in which jurisdictions,  not least because many jurisdictions also require disclosure of reportable transactions on tax returns in addition to the initial DAC6 reporting.

UK reporting system

Although at the time of writing there is no reporting system in place, the UK Government is working on developing an on-line submission system for xml reports.  Consideration is being given to how users might interact with this system, and even whether there should be a facility for amending or removing a submission, although the current regulations do not provide any particular measures for amending a submission.

Where businesses themselves have a reporting obligation, they should consider the practicalities of submitting reports and tracking reporting references and disclosure summaries for inclusion on tax returns.  This will inevitably involve consideration of the reporting environment in more than one jurisdiction. 

We can help

If your business undertakes cross-border transactions and you would like further guidance on the practicalities of implementing systems to report and track obligations under EU mandatory disclosure of reportable cross border arrangements, we would be very happy to discuss your specific circumstances with you.  We have a team of specialists who can review transactions and cross-border arrangements to assess where reporting requirements lie across all EU jurisdiction, as well as a DAC6 reporting tool that can be tailored to your needs to make tracking and reporting an easier task.

Please get in touch with Vesko Petkov, Claire Cowen, a member of the Mazars international tax team, or your usual Mazars contact.