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Belgian Mandatory Disclosure Rules

Belgian Mandatory Disclosure Rules

Mandatory disclosure

In June 2018 a new EU directive came into force which introduced mandatory disclosure rules (DAC6) for intermediaries and relevant taxpayers. These new rules require the disclosure of information on qualifying cross-border arrangements to local tax authorities. The information reported will be exchanged between EU Member States.

The mandatory disclosure rules (MDR) were implemented in Belgium in December 2019 and are effective as of 1 July 2020. However, a transitional period applies to qualifying cross-border arrangements where the first step has been implemented between 25 June 2018 and 1 July 2020.

The legislation applies to direct taxes (e.g. corporate income tax and personal income tax) and indirect taxes, but not to VAT, customs duties and social security.

While the legislation primarily targets potentially aggressive tax planning structures, its scope is quite broad. Accordingly, cross-border tax arrangements that contain one of the defined hallmarks must be reported to the tax authorities. Non-compliance with the reporting obligations may trigger fines of up to EUR 50.000 or EUR 100.000 in case of fraudulent intent.

The rules

What to report

Cross-border arrangement…

An arrangement must concern more than one EU Member State or an EU Member State and a third country. Furthermore, certain tests regarding the participants in the arrangement must be met (i.e. participants must be involved in the arrangement in a cross-border context). The term ‘arrangement’ is not defined and has a broad meaning. It may include a transaction, agreement, action, scheme, operation, event or undertaking.

… that contains at least one of the hallmarks…

A cross-border arrangement is reportable if it contains at least one of the hallmarks. The hallmarks cover a wide range of arrangements and are classified in five categories:

  • Category A - relates to confidentiality imposed on clients, contingent fee arrangements and mass marketed type arrangements.
  • Category B - relates to planning for loss utilization after acquisition of a loss-making company, converting income into an item that is exempt or taxed at a lower rate and circular or self-cancelling transactions.
  • Category C - relates to cross-border payments where there is a deduction/non-inclusion outcome, a preferential tax treatment for the recipient and certain other transactions that exhibit a mismatch.
  • Category D - relates to transactions intended to circumvent transparency reporting rules or hide beneficial ownership.
  • Category E - relates to the use of unilateral safe harbour rules, transfer of hard-to-value intangibles and transfer of assets/functions/risks where a taxpayer’s annual EBIT is reduced by 50% or more.

… some of which must meet the “Main Benefit Test”.

The main benefit test applies to category A, B and some of category C transactions. It is a ‘benefit’ test and not a ‘purpose’ test. Accordingly, it can have an impact on commercially driven transactions as well as tax motivated ones.

This test is met if it can be established that the main benefit or one of the main benefits which, having regard to all relevant facts and circumstances, a person may reasonably expect to derive from an arrangement is the obtaining of a tax advantage.

Who should report

Primary reporting obligation

The primary reporting obligation rests with EU based intermediaries (i.e. EU nexus criterion).

An “intermediary” is defined as anyone who designs, markets, organizes, makes available for implementation or manages a reportable cross-border arrangement (i.e. primary intermediary). In addition, an intermediary also means any person that knows or could be reasonably expected to know that they have provided, directly or by means of other persons, ‘aid, assistance or advice’ in relation to a reportable cross-border arrangement (i.e. secondary intermediary).

Where an intermediary is unable to report due to professional secrecy, they must notify in writing the other intermediaries and/or relevant taxpayer(s) to shift their reporting obligation. In the latter case, the relevant taxpayer may however allow the intermediary to report.

Secondary reporting obligation

The reporting obligation rests with the relevant taxpayer when:

  • there is no EU based intermediary engaged; or
  • the EU intermediary is bound by professional secrecy and that is not waived by the relevant taxpayer.

 

Multiple reporting obligation

Where there is more than one intermediary, all intermediaries must report unless there is written proof that the reporting was done by another intermediary.

Where there is more than one relevant taxpayer and the reporting obligation rests with the relevant taxpayer, the reporting must be done by the relevant taxpayer that:

  • agreed the arrangement with the intermediary;
  • manages the implementation of the arrangement.

 

An exemption applies if there is written proof that the reporting was done by another relevant taxpayer.

When to report

General rules

The reporting by primary intermediaries and relevant taxpayers must be done within 30 days, beginning on:

  • the day after the reportable cross-border arrangement is made available for implementation to that relevant taxpayer, or
  • the day after the reportable cross-border arrangement is ready for implementation by the relevant taxpayer, or
  • when the first step in the implementation has been made in relation to the relevant taxpayer, whichever occurs first.

The reporting by secondary intermediaries must be done within 30 days beginning on the day after they provided aid, assistance or advice.

Transitional period: 25 June 2018 – 30 June 2020

Cross-border arrangements where the first step has been implemented between 25 June 2018 and 30

June 2020, must also be reported. The initial reporting deadline was 31 August 2020, but an administrative deferral has been granted.

Administrative deferral

On 3 June 2020 the Belgian Federal Tax Authorities announced that an administrative deferral of six months is granted for the reporting obligations under the DAC6 legislation. Accordingly, the following deadlines apply:

  • reportable cross-border arrangements of the transitional period must be reported by the latest by 28 February 2021;
  • the kick-off date of the 30-days reporting period for reportable cross-border arrangements of the period between 1 July 2020 and 31 December 2020 starts on 1 January 2021;
  • the first periodic report for marketable arrangements must be submitted by 30 April 2021.

Penalties

Incomplete reporting:

  • EUR 1.250 to EUR 12.500
  • Intentional: EUR 2.500 to EUR 25.000

 

Failure to report/delayed reporting:

  • EUR 5.000 to EUR 50.000
  • Intentional: EUR 12.500 to EUR 100.000

Compliance

Your compliance

As a taxpayer, you are also affected by the mandatory disclosure rules. Therefore, it may be useful to consider the following questions:

  • Are you confident that you have no reportable cross-border arrangements in the transitional period (25 June 2018 to 30 June 2020)?
  • Have you mapped the type of transactions in your organization that may typically trigger reporting under MDR in order to adequately manage your tax compliance risks?
  • Have you set up your internal processes in order to identify potentially reportable cross-border arrangements and to effectively comply with the DAC6 reporting requirements within 30 days, if necessary?
  • Do you need assistance to understand the implications of the DAC6 legislation on your businesses and to ensure compliance with the reporting requirements?

Our solutions

Our team at your service

At KPMG Belgium, we have a dedicated team which closely follows relevant developments and analyses the implementation of the MDR legislation. Their work is supported by KPMG’s EU Tax Center and a network of KPMG Member Firms across Europe. This collaboration facilitates a European-wide coverage of this topic and assistance in interpreting the specific rules in each country.

Our professionals can assist you in developing a process to educate stakeholders, accumulate and assess transactions that are potentially reportable, and use technology to efficiently comply with your obligations.

Our DAC6 Processor

The KPMG DAC6 Processor is a technology solution to support the assessment of reporting obligations. It is designed and developed to manage (potentially) reportable cross-border arrangements and to facilitate compliance in all EU Member States, as well as the UK.

KPMG project approach — modular design
KPMG project approach — modular design

Recent developments

  • 26/06/2020: The Belgian Tax Authorities published the Circular (FAQ) on the DAC6 Mandatory Disclosure Rules. You can read our E-Tax Flash here and download the Circular on the website of the Belgian Tax Authorities.
  • 04/06/2020: The Royal Decree specifying the penalties for the failure to comply with the DAC6 obligations was published.
  • 03/06/2020: The Belgian Federal Tax Authorities announced a deferral of six months based on their discretionary administrative power (i.e. not by a legislative act). You can read our E-Tax Flash here .

Contact us

If you would like to receive more information on the DAC6 legislation and/or the DAC6 Processor, please contact us for more information.

Kris Lievens
Partner
KPMG Tax and Legal Advisers

T: +32 (0)2 708 47 61
E: klievens@kpmg.com

Wouter Caers
Partner
KPMG Tax and Legal Advisers

T: +32 (0)3 821 19 73
E: wcaers@kpmg.com

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