DAC6 Compliance: Why Should Taxpayers Care?

DAC6 compliance – Why should taxpayers care?

DAC6 is a European Directive aimed at tackling tax avoidance and strengthening tax transparency, as well as improving information sharing between EU member states. The Directive imposes mandatory reporting on lawyers, accountants, tax advisers, bankers, and other so-called “intermediaries”.

Are taxpayers required to report DAC6 arrangements in addition to annual tax filings?

As a taxpayer, DAC6 will affect you. While the primary reporting obligation is on intermediaries, there are some cases where the reporting onus will be on the taxpayer. These include the following situations:

When there is no intermediary involved in an arrangement
When the only intermediary involved does not have a presence in the European Union (or the UK)
When legal professional privilege applies to the sole intermediary representing you, and you chose not to waive privilege
When a company within your group acts as an intermediary for arrangements within the group

Why is it important for taxpayers to have a DAC6 tool in place?

Knowledge

Intermediaries are required to report a large amount of information about arrangements they are involved in, including the identification of taxpayers, a summary of the arrangement, and the value of the arrangement. It is therefore highly advisable that taxpayers have an adequate system in place to track exactly what information is being reported to the tax authorities.

Coordination

A taxpayer might have multiple intermediaries working for them. Taxpayers should take control of the process by taking a role in understanding whether the arrangement is reportable, challenging possible over-reporting by certain intermediaries and where appropriate, coordinating between intermediaries to avoid multiple (and possibly differing) reports being submitted regarding the same arrangement. Having a single tool in place can help to coordinate who is reporting, what is being reported and where a DAC6 report is being made.

Reporting

There are many instances where a taxpayer will be required to report a DAC6 arrangement. The tax authority in each EU member state has incorporated DAC6 differently into their local legislation, therefore the requirements of different jurisdictions differ immensely. There might be an obligation to report an arrangement in one jurisdiction and not in another. Further, interpretation of hallmarks and other definitions differ in each EU member state. Taxpayers should also consider that there is a 30-day reporting timeline following a triggering event. Having an end-to-end reporting tool will ensure that the correct reports can be made at the correct time to the correct tax authority.

VinciWorks’ DAC6 reporting solution for all businesses, with any workflow

VinciWorks’ DAC6 reporting tool provides multinational taxpaying businesses with the expertise, knowledge and technical infrastructure to comply with the EU Directive in every EU jurisdiction. The tool features customisable workflows designed and updated for the intricacies of each EU member state’s implementation of DAC6. Countries with stricter reporting guidelines are flagged.

How are you managing your GDPR compliance requirements?

GDPR added a significant compliance burden on DPOs and data processors. Data breaches must be reported to the authorities within 72 hours, each new data processing activity needs to be documented and Data Protection Impact Assessments (DPIA) must be carried out for processing that is likely to result in a high risk to individuals. Penalties for breaching GDPR can reach into the tens of millions of Euros.

“In a world older and more complete than ours they move finished and complete, gifted with extensions of the senses we have lost or never attained, living by voices we shall never hear.”