Retail Compass Summer edition 2019

Disclosure of cross-border tax planning arrangements under EU Directive

Published on 04 July 2019

European Member States are required to implement national legislation requiring the disclosure by intermediaries or, in certain circumstances, taxpayers, of certain cross-border tax planning arrangements by 31 December 2019.

What is happening?

The changes require intermediaries that design, promote or implement tax planning schemes to report potentially ‘aggressive’ tax planning arrangements that cross EU borders to national tax authorities.

Why does it matter?

The new EU Directive captures a broad range of ‘intermediaries’ which in practice will encompass lawyers (both private practice and in-house), accountants, tax and financial advisors, banks and consultants. The new reporting obligations therefore represent an extra regulatory hurdle for these industries.

Although the reporting obligation lies with intermediaries in the majority of instances, it can shift to the taxpayer if: (a) the intermediary is not located in the EU; or (b) the intermediary is bound by professional privilege or secrecy rules.

The obligation to report begins on 1 July 2020, but it applies to all transactions implemented from 25 June 2018. Therefore, intermediaries and their clients will need to be aware of how the Directive applies to any transactions from this date.

Member States are also permitted to bring in penalties for non-compliance with the reporting requirements, which will also apply to clients, should (a) or (b) above be satisfied. Clients therefore need to be aware of the rules when considering entering any tax arrangements.

What action should you take?

  1. Evaluate all your tax arrangements entered into after 25 June 2018 for potential reporting liabilities under the Directive.

  2. Ensure any reportable arrangements are reported after 1 July 2020.

  3. Moving forward, make sure any potential obligations under the Directive are considered before entering into any new tax arrangements.

  4. Work closely with your advisors to help avoid any penalties for non-compliance with the reporting requirements.