The new exchange of information obligations will impact reportable cross-border transactions whose first steps took place from 25 June 2018 onwards.
On 17th December 2019, regulations to transpose Directive (EU) 2018/822 on mandatory disclosure rules (“DAC6” or “MDR”) were published in Malta enacting new mandatory exchange of information obligations on intermediaries and taxpayers. It is expected that its wide scope and mechanisms, which rope in intermediaries and service providers in an unprecedented manner, will drastically increase transparency and cooperation throughout the EU.
The MDR addresses cross-border arrangements that satisfy any of the specific hallmarks. Taxes of any kind are within the scope of DAC6 with the exception of VAT, customs duties, excise duties and social contributions.
The hallmarks may be split in two, that is, those that are accompanied by the main benefit test, that is, an additional test analysing whether the main benefit(s) of the cross-border arrangement in light of the relevant facts and circumstances is that of obtaining a tax advantage, and others that are not accompanied by this secondary test.
Cross Border Transactions
Automatic Exchange of Information and Beneficial Ownership
MDR obliges both primary intermediaries, that is promoters, (including any person who designs, markets, organises or makes available for implementation), and secondary intermediaries, that is service providers (including anyone who knows or could reasonably be expected to know) of a reportable cross-border arrangement to report such information to the local tax authorities. Taxpayers may also be affected by MDR in the event that the reportable cross-border arrangement is not reported by the involved intermediaries (for example when there is no EU based intermediary, when no intermediary is involved, or when the intermediary relies on legal privilege).
Reportable cross-border arrangements whose first steps of implementation took place between 25th June 2018 and 1st July 2020 must be reported by 28th February 2021. The MDR came into effect as from 1st July 2020, however, the start date for the 30-day reporting deadline has been deferred to 1st January 2021 according to an announcement made by the Maltese tax authorities. The first exchange of information will occur on 30th April 2021.
Failure to report on a timely basis will incur penalties that are capped at EUR 20,000.
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