The European Commission published on 21 June the proposal for a Directive on ‘intermediaries’ that aims to establish an obligation for mandatory disclosure to tax authorities of reportable cross-border arrangements coupled with automatic exchange of information. The proposal of the Commission comes in the form of a 5th amendment to the Directive on mandatory automatic exchange of information in the field of taxation (“DAC”). In order to become European Union law, the Commission proposal needs a unanimous support in the Council of the EU by all member states.
In respect of the scope of the directive, the proposal envisages that the intermediaries bear the burden of disclosure to the tax authorities, if they are involved in the design or promotion of an aggressive tax planning arrangement with cross-border implications. The disclosure obligation does not concern purely internal situations concerning one EU member state, due the internal market component necessary to justify a legislative action at EU level. The disclosed information to the national tax authorities shall be automatically exchangeable by tax authorities of all member states.
Where the obligation to disclose is not enforceable due to absence of intermediary, or due to legal professional privilege, the directive envisages shifting of the disclosure obligation to the taxpayer who is benefiting from the arrangement.
In respect of the timing of disclosure, intermediaries shall disclose reportable arrangements within 5 days beginning on the day after an arrangement becomes available for implementation to the taxpayer. The timing is more lenient in case of disclosure by a taxpayer, with obligation to disclose within 5 days once implementation has commenced.
In respect of the hallmarks, which are the criteria that define what constitutes a reportable cross-border arrangement, the directive places these in an Annex, that could be amended and revised by the European Commission once the directive has been implemented. The directive envisages a main benefit test alongside generic and specific hallmarks. The generic hallmarks include: confidentiality from competitors, confidentiality from the tax authorities, premium fees and off-the-shelve schemes. Specific hallmarks include hallmarks related to the main benefit test, specific hallmarks related to the cross-border transactions, to transfer-pricing and specific hallmarks concerning automatic exchange of information in the European Union.
The proposed rules could enter into force on 1 January 2019, in case of adoption by the Council as per the EU treaties.