Category Archives: Tax Evasion

DAC6: UK Mandatory Disclosure Rules Consultation Released

HMRC MDR consultation

On 30 November 2021, HMRC published their draft UK Mandatory Disclosure Rules and released their consultation which seeks views on the design of the draft regulations. The consultation will be open until 8 February 2022.

At the Spring Budget 2021, the UK Government announced that it would implement Mandatory Disclosure Rules(MDR)(2.14). The rules are intended to replace the similar EU DAC6 rules which were implemented in the UK prior to their exit from the European Union. The draft regulations draw closely to the OECD’s Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures.

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 Malta: Deadline for annual notification by non-disclosing intermediaries

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.

On-demand webinar: DAC6 — 10 months on

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Wednesday 10 November, 12:00pm (UK)

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.

The webinar covered:

  • DAC6 recap
  • Top challenges firms are facing
  • Findings from different tax authorities
  • Approaches to legal professional privilege
  • UK MDR
  • What comes next?

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DAC6 Update – November 2021

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.

DAC6 reporting

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. 

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DAC6: Irish Revenue Amend Filing Guidelines

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.

DAC6: Updated list of European Union non-cooperative jurisdictions

On 5 October 2021 the Council of the European Union released a revised list of EU non-cooperative jurisdictions for tax purposes.

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 list contains non-EU countries that encourage abusive tax practices, which erode member states’ corporate tax revenues and underlines the importance of promoting and strengthening of tax good governance mechanisms, fair taxation, global tax transparency and fight against tax fraud, evasion and avoidance, both at the EU level and globally.

The updated EU list is important when considering DAC6 Hallmark D1 which captures arrangements where it is reasonable to conclude that these may have the effect of undermining reporting obligations under Council Directive 2014/107/EU (‘DAC 2’) and the Common Reporting Standard (‘CRS’), as implemented in the domestic legislation of EU Member States.

DAC6 Netherlands: Reporting summary from January to February 2021

Continuing their open communication policy, the Dutch MDR team released details of the DAC6 reports submitted to the Dutch tax authorities in January and February 2021. 

There were 4,429 disclosures made between 1 January 2021 and 28 February 2021. 4,259 of the disclosures were for reports in the historical period from 25 June 2018 until 31 December 2020. Only 170 reports related to new transactions. In total 5035 different hallmarks were reported. 35% of hallmark disclosures related to intra-group cross border transfers, covered by hallmark E3. 25% of hallmarks reported concerned the different characteristics of the C1 hallmarks .Hallmark B2, relating to income conversion accounted for 14% of disclosures. 

Below is a summary of the hallmarks that were reported during the period. Some transactions may have contained multiple hallmarks. 

A1: Conditions of confidentiality: 5 

A2: Fee agreements: 3 

A3: Standardised documents or structures: 33 

B1: Acquiring loss making companies: 3 

B2: Income conversion: 723 

B3: Circular transactions: 228 

C1a: Deductible cross border payments: 346 

C1bi: Low or tax exempts recipients: 316 

C1bii: Blacklisted recipient country: 282 

C1c: Hybrids: 90 

C1d: Preferentially taxed recipients: 268 

C2: Same depreciation: 13 

C3: Double taxation: 41 

C4: Transfer of assets: 382 

D1: Undermining reporting obligations: 17 

D1: Other: 59 

D2: Ownership chains: 25 

E1: Unilateral safe harbour rules: 258 

E2: Hard to value intangibles: 357 

E3: Intra group cross border transfers: 1586 

Total hallmarks reported: 5,035

DAC6 reporting dashboard

VinciWorks’ DAC6 Solution offers reporting solutions for international firms for MDR regulations in many jurisdictions including the Netherlands. Get in touch with us to see how Omnitrack can help ensure you are completing your reporting requirements.

DAC6 France: Legal professional privilege questioned by Supreme Administrative Court

The French Supreme Administrative Court has requested a preliminary ruling from the European Court of Justice (ECJ) regarding the DAC6 filing rules applicable to intermediaries in the case of legal professional privilege.

French domestic law states that intermediaries relying on legal professional privilege are still subject to DAC6 rules, and need to obtain their client’s permission to waive privilege and make a report within a 30 day period. If the relevant intermediary does not obtain their client’s consent, then they have to notify other intermediaries of their reporting obligations and a report needs to be made by a different intermediary within 90 days of notification.

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DAC6 Netherlands: Supervision process

The Dutch MDR team has put a lot of time and energy into open communication throughout the DAC6 process. Whether with intermediaries, software builders or others, the Dutch MDR team has always been available for consultation. The MDR team were aware early on of the potential number of intermediaries and made the decision to update and inform all potential intermediaries via their website, presentations, webcasts, and through their LinkedIn account.

Here is a short overview of how the Dutch DAC6 supervision process operates:

  1. Early on in the process, the MDR team set up clear guidance containing explanations of the DAC6 definitions and criteria. Through the tax authority communicating what, in their should be disclosed there was less room for discussion on these topics.
  2. A clear internal IT process was set up to share the DAC6 disclosures within the Netherlands Tax and Customs Administration, allowing the MDR team to use counter-information from colleagues at the Netherlands Tax and Customs Administration to enhance their review process.
  3. Once the first disclosure has been received, the MDR Team analyses the disclosures from a quality perspective and communicates actively via LinkedIn patterns that they see and what they would like improved. 
  4. The MDR Team set up conversations with disclosures that showed lower quality to discuss how they could be improved in the future.