Background

Due to the disruption being caused by the COVID-19 pandemic EU member states reached a political agreement on 3 June 2020 to allow the postponement of the DAC 6 reporting deadlines for six months.

DAC 6 or EU Council Directive 2018/822 was introduced to provide for the mandatory automatic exchange of information between EU member states in the field of taxation relating to “reportable cross-border arrangements”. DAC 6 targets aggressive tax planning by increasing regulation on the activities of tax planners and advisors. DAC 6 was signed in 2018 and implemented into Irish law in December 2019 (see new Chapter 3A of Part 33 of the Taxes Consolidation Act 1997).

The provisions require “intermediaries” (law firms, tax advisory firms, accounting firms etc) and, in some cases, taxpayers, to file an electronic return with the local tax authority in the relevant EU member state of the reportable cross-border arrangement. Not all cross-border arrangements are reportable but in general if the arrangement bears a certain “hallmark”, as prescribed by DAC 6, disclosure could be a default course of action. Revenue will collate and share information reported to them with tax authorities of other affected EU member states.

Current Main DAC 6 Reporting Deadlines

Under current legislation reports concerning arrangements implemented in the period 25 June 2018 to 30 June 2020 (inclusive) must be filed by 31 August 2020. 

If a reportable cross-border arrangement occurs on or after 1 July 2020, an electronic return must be filed by an intermediary that:

• designs, markets, organises or makes available for or manages the implementation of an arrangement, within 30 days of the arrangement being available, ready or having taken its first step in implementation, whichever happens first, or 
• aids, assists or advises on the design, marketing, organisation, making available for or managing the implementation of an arrangement, within 30 days of when they first provided such aid, assistance or advice. 

The first automatic exchange of information under DAC 6 between EU member states is to occur on and from 31 October 2020. 

New Proposal 

On 8 May 2020, the European Commission released a directive proposal that, once ratified, would postpone the DAC 6 reporting deadlines for three months.

This approach has been reconsidered and under new proposals announced on 3 June 2020 EU member states may choose to apply the reporting deadline extension or retain the original DAC 6 reporting deadlines. It is anticipated that the amending DAC 6 directive will be officially published in the coming weeks once the proposal has been formally adopted by the European Parliament (expected prior to the end of June 2020).

Should Ireland adopt the optional 6-month extension this will mean that arrangements implemented between 25 June 2018 and 30 June 2020 will have to be reported by 28 February 2021. The 30-day reporting period applicable to reportable cross-border arrangements made available for implementation, ready for implementation, or where the first step in their implementation has been made between 1 July 2020 and 31 December 2020 will begin on 1 January 2021. 

Conclusion

Should Ireland adopt the 6 month deferral this will give added time to intermediaries to get ready for implementation of DAC 6 and to allow a timely review of transactions that have occurred in the period 25 June 2018 to 30 June 2020 to ascertain whether a cross-border arrangement is reportable or, in the case of law firms, if legal professional privilege applies (in which case the onus on reporting details of the arrangement falls on the taxpayer).

Further details on this proposal and DAC 6 generally can be obtained from Brian Duffy, email Brian here or call on: +353 1 6395 156