Fri 13 Dec 2019
Tax Governance is now becoming even more important with the increasing disclosure and transparency requirements. A recent workshop that looked at DAC6 and Corporate Criminal Offence (CCO) revealed some surprises for attendees and it’s important to keep be aware of these upcoming requirements.
The new EU Mandatory reporting directive for cross-border transactions (DAC6) is required to be implemented by all EU member states by 31 December 2019. Whilst it is effective from 1 January 2020, it requires transactions meeting at least one of the hallmarks to be reported where the first step was implemented after 25 June 2018 and therefore has an 18 month look back. The hallmarks are widely drawn and are subject to different local requirements in each EU state, with hefty penalties for failing to report. Some territories adopted a year early and include additional taxes, for example. Whilst the primary reporting obligation falls on intermediaries, who are widely defined, companies will have significant interest in ensuring that a consistent message is reported in respect of their tax affairs by third party advisers in affected territories.
All international groups who carry out cross-border transactions where at least one of the parties is in an EU member state. Until the UK leaves the EU, this therefore includes all UK companies carrying out cross border transactions and a domestic version of the rules is likely to continue to apply post Brexit in any case.
CCO legislation has been in place since April 2017 and makes a company criminally liable for failing to prevent the facilitation of tax evasion. This means that if anyone acting on behalf of the company (as employee, contractor or other agent) commits tax evasion anywhere in the world, the company can be prosecuted, with the only defence being that proper procedures are in place to prevent it. HMRC believe that many companies do not have adequate procedures and in our experience, we have seen a mixed response to date. We are helping companies ensure they have robust internal procedures across HR, VAT, Customs Duties, purchasing and sales transactions in response to the legislation.
All companies (including charitable companies) fall in the remit of CCO There is no de minimis.
In both these areas, penalties for non-compliance can be costly: up to £1m for DAC6 in the UK (around £5m in Poland) and unlimited for CCO failure. If you are a tax director and you advise on cross-border transactions and don’t know whether you have a reporting obligation under the new EU mandatory disclosure rules, we can help you so please get in touch with Vesko Petkov and Claire Cowen.
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