DAC6 reporting delay proposed by EU Commission due to COVID-19

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DAC6 summary

Council Directive 2018/822 – known as DAC6 – is the sixth amendment to the EU Directive on Administrative Cooperation 2011/16/EU. DAC6 is aimed at providing the tax authorities with a “warning system” in respect of potentially aggressive tax planning schemes. It does so by imposing an obligation on intermediaries (and, in certain circumstances, on taxpayers) to file information on cross-border arrangements which fall within any one of the ‘hallmarks’ set out in the Directive (“reportable arrangements”) with the relevant EU tax authority. That authority will then share that information with other relevant EU tax authorities by way of automatic information exchange. 

DAC6 itself has been in force since 25 June 2018, and it is due to become applicable under domestic law in each member state of the EU (including the UK) on 1 July 2020. 

Currently, the first DAC6 filings on reportable arrangements, which are (broadly) implemented or available to be implemented on or after 1 July 2020, are due to be made on or before 31 July 2020. Separately, reports in respect of arrangements the first step of which was implemented between 25 June 2018 and 30 June 2020 (the “backfill period”) are due to be made on or before 31 August 2020. The first exchange of information between tax authorities is due to be undertaken by 31 October 2020.


Proposed delay to DAC6 reporting

However, as a result of the COVID-19 pandemic, the European Commission (EC) has proposed a Directive amending DAC6 which, if adopted, would delay these DAC6 reporting and information exchange deadlines. The proposal acknowledges that the “severe disruption caused by the … pandemic hampers the timely compliance of … the persons liable to report cross-border arrangements and affect[s] negatively the capacity of member states’ tax administrations to collect and process the data”, such that deferring the commencement of both reporting and information exchange under DAC6 is necessary. 

Under the proposed amending Directive, while the regime would still come into force in each member state (including the UK) on 1 July 2020, the reporting and information exchange deadlines would be delayed by three months, as follows:

  • the start of the 30 day period within which filing must be made in respect of reportable arrangements implemented or available to be implemented from 1 July 2020 would begin on 1 October 2020 (rather than 1 July 2020), so that the earliest DAC6 filing in respect of that period would be due by 31 October 2020 (rather than 31 July 2020);  
  • filing in respect of reportable arrangements the first step of which was implemented during the “backfill period” would be due by 30 November 2020 (rather than by 31 August 2020); and 
  • the first exchange of information under DAC6 between member states would be made by 31 January 2021 (rather than 31 October 2020). 

The EC’s proposed Directive also empowers the Commission to further extend the deadlines for filing and exchange of information by a maximum of three additional months, in the event that lockdown measures remain necessary in the member states. The limited nature of the additional deferral reflects the EC’s concern that, with all member states facing reduced tax revenues and increased costs as a result of the COVID-19 pandemic, it will be more important than ever to prevent tax avoidance and evasion going forward.

Assuming that the European Council adopts the amending Directive, then it will enter into force on the day following its publication in the Official Journal of the European Union.


United Kingdom: implementation of delay

Prior to the EC’s proposal to delay reporting and information exchange under DAC6, the UK’s Law Society had asked the UK tax authority, HM Revenue and Customs (HMRC), whether they would consider deferring the commencement dates of DAC6 in the UK.

While HMRC has not responded to the Law Society, it has published guidance stating that it accepts that any intermediary or taxpayer who fails to meet filing deadlines under DAC6 due to difficulties relating to COVID-19 will have a reasonable excuse (and therefore should not be liable to penalties) so long as the report is made without unreasonable delay after the difficulties are resolved. 

HMRC has also stated that, as and when the amending Directive is final, HMRC will confirm how it will apply to UK rules.


France and Germany: implementation of delay

Since the EC’s proposal to delay reporting and information exchange under DAC6, the French and German authorities have not yet indicated whether they would allow intermediaries or taxpayers to defer their reporting obligations. 

However, if the EC’s proposal is adopted by the member states, the amending Directive should be promptly implemented into French and German domestic law.


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