On 11 January 2022, the UK government published a consultation seeking views for how a worldwide 15% minimum corporation tax should be domestically implemented. The consultation will run for 12 weeks, until 4 April 2022.
In May 2019, the OECD/G20 Inclusive Framework on BEPS (Inclusive Framework) agreed a Programme of Work for Addressing the Tax Challenges of the Digitalisation of the Economy.
The Programme of Work is divided into two pillars:
Pillar One addresses the allocation of taxing rights between jurisdictions and considers various proposals for new profit allocation and nexus rules;
Pillar Two (also referred to as the “GloBE” proposal) focuses on the remaining BEPS issues and seeks to develop rules that would provide jurisdictions with a right to “tax back” where other jurisdictions have not exercised their primary taxing rights or the payment is otherwise subject to low levels of effective taxation.
What is the history of the EU’s list of non-cooperative jurisdictions?
In January 2016, the EU Commission presented its Anti-Tax Avoidance Package, in which it committed to a “clear, coherent and objective” approach to tackle tax governance in relation to non-EU jurisdictions.
In November 2016, the Council mandated the Code of Conduct group (business taxation), a Council working party, to carry out the preparatory work to establish a list of non-cooperative jurisdictions.
The Code of Conduct group screened 92 jurisdictions, selected on the basis of:
their economic ties with the EU
their institutional stability
the importance of the country’s financial sector
In December 2017 the EU launched its initial list of non-cooperative jurisdictions for tax purposes. The list included non-EU countries that encourage abusive tax practices, which erode member states’ corporate tax revenues.
The EU list of non-cooperative jurisdictions for tax purposes is a tool to tackle:
tax fraud or evasion: illegal non-payment or underpayment of tax
tax avoidance: use of legal means to minimise tax liability
money laundering: concealment of origins of illegally obtained money
The first list included 17 non-EU countries or territories. A state of play document was also released that set out the jurisdictions which had responded with sufficient commitments. They needed to take effective action by the end of 2018, or in some cases 2019, to avoid being listed in the future.
On 30 November 2021, HMRC published its draft UK Mandatory Disclosure Rules (MDR) and released its consultation which seeks views on the design of the draft regulations. The consultation will be open until 8 February 2022. The UK MDR is expected to come into force in summer 2022, replacing UK DAC6.
MDR requires advisers (and sometimes taxpayers) to report information to the tax authorities on certain prescribed arrangements and structures, including those that could circumvent existing tax transparency reporting rules known as the Common Reporting Standard or hide ownership of assets.
For this webinar, we were joined by John Sandeman, HMRC’s policy official for Mandatory Disclosure Rules, who helped attendees get to grips with the UK MDR and how it applies to your organisation. John also answered attendee questions.
In 2018 the OECD developed Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures (“OECD’s Model Rules”). These rules require taxpayers and their advisers to report information to tax authorities on certain types of arrangements and structures that might facilitate tax evasion.
The EU responded to the OECD’s mandatory disclosure rules by introducing the EU Council Directive 2011/16, more commonly known as DAC6. As of January 2021, reporting under DAC6 was mandatory in all EU Member States.
Prior to the UK’s exit from the European Union, the UK government intended to adhere to the DAC6 regulations in line with the other EU member States. But at the spring Budget 2021, the UK government announced that DAC6 would be replaced with model rules in line with the OECD’s Model Rules. The consultation released on 30 November 2021 relates to the draft regulations to implement UK MDR, which means that the rules will apply on a global, rather than an EU, level following Brexit.
What is the UK MDR?
UK MDR refers to the UK’s Mandatory Disclosure Rules, the new regulations that came into force in summer 2022 and replace the current UK DAC6 regulations. The regulations are aimed at preventing tax evasion by requiring taxpayers and intermediaries to disclose information on certain types of arrangements and structures to HMRC. The UK MDR limited the regulations as they existed under DAC6 to apply to only those arrangements that would be reportable under the OECD’s Model Rules.
New Changes in UK MDR: Free Guide
VinciWorks has developed a guide to UK MDR that goes through everything you need to know on the subject. The topics covered in the overview include an overview of the UK’s approach, how UK MDR will be different from DAC6, timelines for implementation, and what will happen to the existing DAC6 regulations in the UK. The guide then goes on to cover information about historic reporting periods, intermediaries, taxpayers, hallmarks, reporting obligations, penalties, and reporting format. Finally, the guide introduces VinciWorks’ own DAC6 and MDR reporting solution.
For a free download of the comprehensive guide, click here.
VinciWorks’ DAC6 and MDR reporting solution
VinciWorks has built a robust MDR reporting solution providing intermediaries such as law firms, accounting firms and multinational businesses with the expertise, knowledge and technical infrastructure to report and manage cross-border transactions. From one centralised system, organisations can fulfil their reporting requirements across every EU member state as well as every country that has introduced the OECD’s MDR into law. Built in consultation with over 100 leading international firms, international tax experts, HMRC and other regulators, our tool features customisable workflows designed and updated for the intricacies of each EU country’s implementation of the rules. We offer a number of hosting options to suit any organisation’s needs, including on-premises hosting.
Built-in guidance on whether a transaction is reportable
Reminders for reporting deadlines and reviewing ongoing transactions
Customisable dashboard to make it easier to stay on top of deadlines
Customisable workflow to easily collect all pertinent data
MDR requires advisers (and sometimes taxpayers) to report information to the tax authorities on certain prescribed arrangements and structures including those that could circumvent existing tax transparency reporting rules known as the Common Reporting Standard or hide ownership of assets.
VinciWorks will be hosting a webinar in the coming weeks with representatives from HMRC to discuss the consultation.
DAC6 legislation in Malta requires that an intermediary who is exempt from reporting in Malta (such as those who rely on legal professional privilege) must provide the Commissioner for Revenue with an annual updated situation including a list of the reportable cross-border arrangements that were not reported.
On 11 November 2021, the Maltese Commissioner for Revenue announced that the deadline for the notification needs to be submitted by 28 February 2022 for all transactions where the triggering event was met by 31st December 2021.
The annual notification form can be accessed here.
VinciWorks’ DAC6 Solution offers a tracking, auditing and reporting solution for all firms in Malta. Get in touch with us to see how Omnitrack can help ensure you are completing your reporting requirements.
Following multiple delays, DAC6 has now been in force in most EU Member States since January 2021. Businesses across Europe are now reporting on cross-border transactions, with many still grappling with when, how and what they need to report.
In this webinar, Director of Best Practice Gary Yantin and Head of Legal and Product Research Ruth Mittelmann Cohen discussed the challenges that intermediaries and taxpayers face, give an overview of how the different EU Member States and the UK have implemented DAC6 and reveal the reporting patterns emerging from the different tax authorities. They also gave an update on the UK’s consultation document on MDR.
It has now been over 10 months since DAC6 has been in force in most EU member states and the UK. Here are some highlights from 2021.
While reporting got off to a rocky start for some tax authorities, the teething problems are now over and tax authorities have begun reviewing the reports they have received. VinciWorks were in touch with many tax authorities, and here is a short reporting summary of a few key member states:
Germany: As of 11 October 2021, a total of 14,047 reports have been received and accepted by the Federal Central Tax Office (BZSt).
Finland: As of 15 October 2021, roughly 250 reports have been filed in Finland. The most frequently reported hallmark categories that have been reported are C and E.
Netherlands: As of 31 March 2021, there were 4,562 reports filed. 3,254 reports were from the original historic period. 1,042 reports were from the deferral period. 265 reports related to transactions from 1 January – 31 March 2021.
Belgium: As of 22 March 2021, the Belgium Ministry of Finance received 535 reports.
Czech Republic: As of 12th October there were 141 DAC6 reports in the Czech Republic. The majority of reports were relating to Hallmark categories D1b, C1d and the E category.
Sweden: As of 30th June 2021, the Swedish Tax Agency received 486 reports. The majority of reports related to hallmark E2 and E3.
On 29th October 2021, the Cyprus Tax Department released a new publication in the Official Gazette, Decree No. KDP 438/2021, which implements the EU directives on reportable cross-border arrangements (DAC6). The guidance in relation to reporting in Cyprus has also been updated.
The Irish Revenue’s Tax and Duty Manual Part 33-03-04 was updated in October 2021. The main amendments relate to Sections 3.2 and 4.2 which now include updated screenshots and guidance. This was necessary following the Irish Revenue releasing a new XSD schema in July 2021 reflecting the UK’s exit from the European Union. Most EU Member States have been updating their XML schemas in response to the amended DAC6 Central Directory Business Validation Rules by the European Commission.