Action needed due to reporting obligations for cross-border tax arrangements (EU DAC6 Directive)
Today, we would like to draw your attention to a new compliance module:
Since 01.07.2020, the EU-wide DAC6 Directive has become subject to a binding reporting obligation for certain
cross-border matters in Germany, which also applies retrospectively to all cross-border tax arrangements
implemented after 25.06.2018. Arrangements that are subject to a reporting obligation and happened within
the timeframe 25.06.2020 – 01.07.2020 must be reported by the end of August 2020. Going forward, such
arrangements must be reported to the Federal Central Tax Office within 30 days.
A cross-border arrangement becomes subject to these new reporting obligations if it has special
characteristics, including i.a.:
In addition to standardized tax arrangements, individual arrangements may also fall under the reporting
obligation if at least one of the characteristics is applicable. For example, cross-border restructurings such
as mergers and contributions, cross-border loan relationships, conversions or license payments may be
subject to the reporting obligation. Similarly, the "conversion" of income into either assets or other
lower-taxed or tax-free types of income may also lead to the reporting obligation.
In some cases, a reporting obligation can be avoided if there are sufficient economic reasons that result is a
scenario in which potential tax advantages from the "structuring" become secondary (i.e. do not reflect one
of the primary reasons for the "structuring"). The evaluation as to whether a transaction triggers a reporting
obligation is done via indicator catalogues and, if necessary, via a main-benefit-test.
Parties, subject to reporting requirements, are generally intermediaries such as tax advisors and lawyers
involved in the structuring. However, the taxpayers themselves may also become subject to the reporting
requirements, i.e. a fund company and its shareholders.
The new reporting obligations will result in additional workload (especially in terms of time expenditure) for
fund managers of cross-border fund-set ups and/or for those with cross-border arrangements in their
portfolios. It is also likely that investors will increasingly request corresponding information. If the reporting
obligation is violated intentionally or recklessly, a fine of up to EUR 25,000 per violation may result in
Germany. If other member states are also affected, the fine may increase substantially.
What needs to be done now?
If you have received questionnaires from your investors, please contact us.
We are happy to help you answer them.
If you are working on cross-border transactions with portfolio companies, we recommend that you ask the
lawyers involved to carry out a DAC6 analysis.
We will be happy to sit down with you to conduct an evaluation based on your needs. We have a
questionnaire and a main benefit test to help us examine any cross-border portfolio transactions and/or
managerial issues that have arisen since June 2018.
Should this analysis result in reporting requirements, we will be happy to take care of those for you.
Please do not hesitate to contact us.