As mentioned above, if a transaction falls under a hallmark, but there is no EU intermediary involved, the reporting obligations fall to the taxpayer residing in the EU, i.e., for example, to the EU subsidiary of a Swiss company.
The hallmarks that trigger a reporting obligation are drafted very broadly. They even catch standard transactions such as the following:
Transferring functions to another country
- A German group entity forming part of a Swiss based company transfers certain sales functions to its subsidiary in Poland, where taxes are lower. The additional income realized by the Polish company will be distributed to the German parent company, which leads to an overall lower tax burden.
- This transaction may fall under hallmark B.2 of the Directive: An arrangement that has the effect of converting income into capital, gifts or other categories of revenue which are taxed at a lower level or exempt from tax.
- The main benefit test is satisfied if one of the main benefits of the transaction is a tax advantage; which is likely this case.
- Therefore, this transaction must in principle be reported by the German subsidiary.
Granting a loan to a Spanish subsidiary
- In December 2018, a Swiss holding company granted a loan to its Spanish subsidiary. Whilst the interest is deductible in Spain, it is not taxable at cantonal and communal level in Switzerland (status of holding company). Even though the holding status will be abolished as of 1 January 2020, such transactions are caught by DAC6 because of its retroactive effect dating back to 25 June 2018.
- This transaction may fall under hallmark C.1(d) of the Directive: An arrangement that involves deductible cross-border payments (…) where (…) the payment benefits from a preferential tax regime in the jurisdiction where the recipient is resident for tax purposes.
- As one of the main benefits of this transaction is a tax advantage, the main benefit test is satisfied, too.
- Therefore, this transaction must in principle be reported by the Spanish subsidiary.
Please see our factsheet for additional examples.