The Council of the European Union on 24 June 2020 announced that the EU will give EU Member States the option of more time to comply with certain rules on cross-border information reporting. The deferral is provided as a response to the coronavirus (Covid-19) pandemic.
Following informal agreement reached by EU Member States in early June 2020 and green light from the European Parliament on 19 June 2020, the Council of the EU announced that it has adopted an amendment to the Directive on Administrative Cooperation (DAC), allowing EU Member States an option to defer the time limits for filing and exchange of information, with respect to mandatory disclosure requirements (MDRs) for intermediaries and relevant taxpayers under the Directive on Administrative Cooperation (DAC6).
The EU Council’s announcement notes that the optional deferral is in response to the severe disruption to the activities of many financial institutions, tax advisers and tax authorities caused by the Covid-19 pandemic and lockdown measures. The amendment provides the possibility for the Council to extend the deferral period once, for a maximum of three further months. Any extension would depend on the evolution of the pandemic and would be subject to strict conditions.
Amendments to the reporting deadlines
The amendments, as adopted, give EU Member States the option to delay the deadlines for filing information on reportable cross-border arrangements by up to six months, as follows:
• 1 January 2021 Ι 30-day period for reporting cross-border arrangements starts
The beginning of the 30-day period for reporting cross-border arrangements, will likely be extended from 1 July 2020 to 1 January 2021.
• 28 February 2021 Ι Reporting of historical cross-border arrangements
The deadline for the reporting of historical arrangements - implemented between 25 June 2018 and 30 June 2020 - will likely be extended from 31 August 2020 to 28 February 2021.
• 30 April 2021 Ι Marketable arrangements
The new deadline for the first periodic report on marketable arrangements, will likely be 30 April, 2021.
• 30 April 2021 Ι First exchange of information
The first exchange of information on reportable cross-border arrangements between EU Tax Authorities, will likely take place on 30 April 2021, instead of 31 October 2020.
What does this mean for Cyprus?
It is expected that Cyprus will opt to amend its draft legislation and postpone the initially stipulated deadlines by six months, based on the above deadlines.
What is the need for action?
DAC 6 will affect Cypriot companies or Cypriot permanent establishments of foreign companies with cross-border transactions, regardless of the postponement of the reporting deadlines. Given the large penalties, even where it is determined that no transactions are reportable, this should still be documented accordingly, to maintain an audit trail.