New mandatory disclosure rules formally adopted by the Council of the European Union

EU mandatory disclosure requirements

Adoption of the EU mandatory reporting regime in respect of certain reportable cross-border arrangements are much broader than the UK’s Disclosure of Tax Avoidance Schemes rules.

Claire Angell

Partner, Head of Energy Tax

KPMG in the UK


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On 25 May 2018, the Council of the European Union formally adopted new mandatory disclosure rules (MDRs), also known as DAC 6, for qualifying intermediaries and relevant taxpayers.

In short, as of 1 July 2020, intermediaries or – in some cases – taxpayers, will be required to disclose to their tax authorities information on reportable cross-border arrangements.

Despite this application date, reportable cross-border arrangements (covering transactions where implementation commences between the period from 25 June 2018 to 1 July 2020) must also be reported by 31 August 2020.

Overview of the rules

The EU Mandatory Disclosure rules are much broader than the UK’s Disclosure of Tax Avoidance Schemes (DoTAS) rules and contain fewer filters and exemptions.

The definition of an intermediary subject to the reporting obligation is drawn very broadly and includes any person who designs, markets, organises or makes available for implementation or manages the implementation of a reportable arrangement.

It also covers those persons who know or could reasonably be expected to know that they have undertaken to provide assistance with respect to a reportable arrangement. This could therefore broaden the application to other parties to a transaction. If there is no intermediary, the obligation to disclose shifts to the taxpayer.

To be reportable, the arrangement must be cross-border. A cross-border arrangement is one that affects one or more EU Member States. Therefore a transaction between, say, the UK and the US would be within the definition.

The arrangement also has to bear one (or more) certain specific hallmarks. Some of the hallmarks have a ‘main benefit test’ filter – where one of the main benefits is the ‘obtaining of a tax advantage’. 

The hallmarks cover a broad range of transactions, including, for example, loss buying transactions, as well as transactions where there is a tax deduction in one jurisdiction with the receipt being taxed at zero or nearly zero. It also includes a specific transfer pricing hallmark in relation to intra-group transactions.

The rules apply to direct taxation and so are primarily focused on corporate tax and income tax. However, some forms of indirect tax may be included.

The reported information will include client specific data (including the name, address, tax reference and size of transaction). The information will be automatically exchanged each quarter by the competent authorities of each Member State via a central directory on administrative cooperation, to be developed by the European Commission by the end of 2019. The automatic exchange of information will take place within one month of the end of the quarter in which the information was filed, with the first information having to be communicated by 31 October 2020.

UK implementation of DAC 6

The draft Finance Bill 2018/19 published on 11 July 2019 includes enabling clauses to provide for the MDR to be enacted in domestic legislation by the end of 2019. These clauses were expected but the real detail of how the UK intends to implement MDR will be in secondary legislation which will be subject to consultation during 2019.

There remains a lack of clarity around the Directive itself, which has the potential to be extremely broad, and how the UK will interpret it. In particular, the interaction between the EU regime and our domestic disclosure regime (DoTAS), remains unclear. It does, however, make it clear that Brexit is not expected to affect the timeline, at least for now.

For more information, see our Euro Tax Flash prepared by KPMG’s EU Tax Centre here or contact Claire Angell or Sharon Baynham.

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