DAC6: The EU Directive on cross-border tax arrangements

Playback of this video is not currently available

Webinar: DAC6: The EU Directive on cross-border tax

DAC6: The EU Directive on cross-border tax arrangements - Are you prepared?

Join us as we provide more insights about this new reporting obligation and what it means for your business.

The EU Council Directive 2011/16 in relation to cross-border tax arrangements, known as DAC6, has been in force since 25 June 2018. DAC6 aims at transparency and fairness in taxation.

DAC6 applies to cross-border tax arrangements, which meet one or more specified characteristics (hallmarks), and which concern either more than one EU country or an EU country and a non-EU country. It mandates a reporting obligation for these tax arrangements if in scope no matter whether the arrangement is justified according to national law.

Failure to comply with DAC6 could mean facing significant sanctions under local law in EU countries and reputational risks for businesses, individuals and intermediaries.

Therefore businesses need to understand the importance and implications of the directive and the need to act now to ensure compliance by the deadline in 2020.

What are the consequences of reporting?

  • The automatic exchange of information between the EU Member States’ tax authorities does not appear to be limited to those tax authorities who are directly interested in the cross-border arrangements. Member States may also share the information with tax authorities in third countries, with which they have information-sharing agreements, where the information is relevant to those third countries.
  • Taxpayers will want to ensure that what is disclosed to tax authorities under these rules is consistent with their other filings, such as Country-by-Country Reporting. Close and timely liaison between taxpayers and their tax and other advisers will therefore be important.

When will reporting commence?

Once the rules become fully applicable (i.e. on 1 July 2020), intermediaries and taxpayers will be required to file information with their national tax authority within thirty days of the first of the following dates:

  • on the day after the reportable cross-border arrangement is made available for implementation; or
  • on the day after the reportable cross-border arrangement is ready for implementation; or
  • when the first step in the implementation of the reportable cross-border arrangement has been made; or
  • (only when an intermediary is involved) when the intermediary provided aid, assistance or advice.

As a transitional measure, where the first step in a reportable cross-border arrangement is implemented between 25 June 2018 and 30 June 2020, the arrangement should be reported between 1 July 2020 and 31 August 2020.

How are Singapore headquartered groups affected by DAC6?

DAC6 is relevant for Singapore headquartered groups who have subsidiaries, branches or investment structures in member states of the European Union. Cross-border arrangements where at least one EU member state is affected could be subject to reporting. For a Singapore headquartered group, in particular (but not limited to) the following transactions could be subject to reporting:

  • Arrangements between two EU subsidiaries/branches of this multinational group
  • Arrangements between an EU subsidiary/branch and the Singapore headquarter 
  • Arrangements between an EU subsidiary/branch and any other non-EU/non-Singapore group company

In the case of a reportable arrangement, either the intermediary involved into this arrangement (e.g. tax advisor, bank etc.), or the taxpayer itself would be obliged to report the arrangement under DAC6. Consequently, the EU subsidiaries/branches of a Singapore headquartered multinational group could be obliged to report certain cross-border arrangements.

The subsidiaries/branches of Singapore headquartered companies that fulfil the definition of an “intermediary” for a specific arrangement (e.g. banks typically qualify as intermediary), will also need to report the transactions where they are involved as an intermediary.

In case of non-compliance, there will be significant penalties. According to the directive, each member state shall lay down the rules on penalties applicable to infringements of national provisions adopted. Penalties vary significantly between Member States, and go up to EUR 5 Mio. (in Poland).

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 clients to understand DAC6, and the broader tax policy context, and implement effective controls and processes to ensure all reportable cross-border arrangements are proactively identified and managed.

Impact Assessment
  • Are you aware of the scope of the new rules? 
  • Which of the hallmarks may be applicable for your business and industry?
Governance Framework
  • Are team and individual roles and responsibilities clearly defined?
  • Do you have controls in place and is your staff appropriately trained to identify all potentially impacted transactions and can you leverage existing processes?
  • Is the decision making process and control framework formalised and can it stand up to scrutiny?
  • Do you know what your advisors will be reporting? Is it consistent with your understanding?
  • How does the tax or finance team capture transactions which could trigger the wider hallmarks, even where they are not involved?
Data Management
  • Do your systems provide relevant data attributes that would help you identify and disclose reportable transactions?
  • Would your existing systems and processes enable effective and efficient collation, analysis and sharing of reportable transactions both internally and externally with tax authorities?
Reporting
  • Which technology do you use to report cross-border arrangements?

{{filterContent.facetedTitle}}

{{contentList.loadingText}}

Contact us

Chris Woo

Chris Woo

Tax Leader, PwC Singapore

Tel: +65 9118 0811

Abhijit Ghosh

Abhijit Ghosh

Tax Markets Leader, PwC Singapore

Tel: +65 8223 0698

Tan Tay Lek

Tan Tay Lek

Partner, Corporate Tax, PwC Singapore

Tel: +65 9179 2725

Follow us