The EU is cracking down on some cross-border tax planning.
The European Commission has announced that, under new EU transparency rules, intermediaries such as tax advisers, accountants, banks, and lawyers who design and promote potentially aggressive tax planning arrangements will be required to report these arrangements to their tax authorities starting July 1, 2020.
These changes were originally proposed in June 2017, and appear to follow an earlier public consultation (see New EU Disclosure Rules for Advisers and Taxpayers). Under the new rules, intermediaries would be generally responsible for disclosing a reportable cross-border arrangement within 30 days after the arrangement becomes available for implementation or when the first implementation step has been taken, whichever comes first. However, where there is no intermediary, the obligation shifts to the taxpayer that uses the arrangement. This can occur when, for example, the taxpayer designs and implements an arrangement in-house, when the intermediary does not have a presence in the EU, or when an intermediary cannot disclose the necessary information because of legal professional privilege. EU Member States will begin to exchange information on these arrangements by October 31, 2020.
The new rules may apply where an arrangement has certain "hallmarks" that the European Commission believes strongly indicate tax avoidance or abuse, including confidentiality conditions, contingency fees, acquiring a loss-making company to use its losses to reduce a tax liability, circular transactions and deductible cross-border payments that benefit from a full exemption or from a preferential tax regime, among others. Failure to disclose reportable arrangements would be subject to penalties as determined by the Member States.
For more information, contact your KPMG adviser.
Information is current to March 27, 2018. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500