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.
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.
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:
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.
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.
The reporting obligation rests with the relevant taxpayer when:
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:
An exemption applies if there is written proof that the reporting was done by another relevant taxpayer.
The reporting by primary intermediaries and relevant taxpayers must be done within 30 days, beginning on:
The reporting by secondary intermediaries must be done within 30 days beginning on the day after they provided aid, assistance or advice.
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.
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:
As a taxpayer, you are also affected by the mandatory disclosure rules. Therefore, it may be useful to consider the following questions:
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.
If you would like to receive more information on the DAC6 legislation and/or the DAC6 Processor, please contact us for more information.
T: +32 (0)2 708 47 61
T: +32 (0)3 821 19 73