The EU has adopted Directive 2018/822 known as cross border-tax regulations, known as DAC6, which member countries are obliged to incorporate into their fiscal legislative framework. This Directive aims to enhance transparency and exchange of information between member countries on combating cross-border aggressive tax planning.
by Thanos S. Chonthrogiannis
©The law of intellectual property is prohibited in any way unlawful use/appropriation of this article, with heavy civil and criminal penalties for the infringer.
Both taxpayers and any of their advisers (intermediates in the transaction) are obliged to notify the tax authorities of any cross-border transactions if they are characterized by specific characteristics. The tax authorities of all EU member countries will exchange this information every calendar quarter. The first automatic exchange of information will take place by 30 April 2021.
What is defined as
Declared Cross-Border Transaction
It is a transaction involving either more than one member country or a member country and a third country, and since specific conditions are met regarding the participants and the distinctive features of the arrangement.
Intermediate
In general, each person who draws up has, organizes, or manages the implementation of this transaction (e.g., lawyer, accountant, tax adviser, etc.). If this intermediary is classified by profession as a professional secrecy (e.g., lawyer) then he is exempt from the obligation to disclose the transaction.
The information disclosed includes details of the parties involved in the transaction such as name, VAT number, tax domicile, etc. details of the cross-border arrangement itself, any distinctive features used to classify the cross-border transaction as declarable.
The EU Directive and the features of aggressive tax planning
This directive therefore covers all taxes provided for by the tax legislation of a Member State, except for VAT, customs duties, excise duties and insurance contributions.
About aggressive tax planning, the EU directive does not give a clear definition. But it gives those necessary characteristics of a transaction which in turn indicate the existence of tax avoidance or abuse.
There are five (5) categories of features (Hallmarks) of a single transaction. These categories of features apply if the main benefit test is first applied, which will indicate whether there is the main benefit or one of the main benefits that one can reasonably expect from the transaction, with a expectation of obtaining a tax advantage (e.g. tax exemption, tax reduction, tax refund or deferred tax, tax loss increase, etc.).
According to tax legislation, both businesses and individuals as well as their ‘intermediate’ advisers should examine and examine their cross-border transactions carefully in the future to assess the specific characteristics of a manifest transaction in order to see if they are obliged to disclose them to the tax authorities.
Otherwise, if they do not declare them, significant fines are provided for. The deadline for notification of the transaction is set at 30 days from the day following the day on which the transaction is ready or available for implementation or from the completion of the first stage of implementation (whichever of the three stages is implemented first).
