Comprehensive intelligence that adapts to the nature and reporting country of the arrangement

Attempting to determine whether an arrangement should be reported under DAC6 is not simply a matter of reading the Directive or the Hallmarks. Each EU member state has transposed DAC6 into local law, many times with slight modifications.

VinciWorks’ DAC6 reporting tool features built-in workflow rules and expert knowledge for every member state. These workflows are available out-of-the-box and require no configuration.

The DAC6 reporting tool:

  • Provides country-specific guidance for every member state in English
  • Includes translated versions of some key government documents
  • Adapts the workflow to each member state’s requirements
  • Prompts the user to add local translations of the arrangement details where needed
  • Detects when domestic transactions should be reported
  • Is ready for automatic reporting in multiple jurisdictions with built-in XML schemas

This automatic intelligence and workflow was built in collaborate with international tax experts and is based on our comprehensive guide to DAC6 implementation across Europe.

To illustrate this, here are a number of examples from the DAC6 reporting tool.

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DAC6 is an EU directive that requires lawyers (and other intermediaries) to report certain cross border tax arrangements to local tax authorities.

There is a provision within DAC6 that exempts lawyers from reporting, where a report would breach legal professional privilege. In such a case, the lawyer is expected to notify the taxpayer (and in some cases other intermediaries) of their disclosure obligations under the rules, provided that doing so does not itself breach legal professional privilege.

The Law Society of England and Wales has just published its guidance on LPP.

The main points from the Law Society are as follows:

  • Before making a DAC6 report to HMRC, lawyers should ask themselves whether any information in the report would reveal the substance or subject matter of confidential communications that have passed between them and their clients in the context of providing legal advice
  • In most cases, the Law Society expects that LPP will prevent a lawyer who has advised a client about a reportable cross-border arrangement from making a report under DAC6
  • If LPP applies, the lawyer must inform the client about their obligation to report under DAC6
  • If a lawyer makes a report to HMRC under DAC6, HMRC should send them an arrangement reference number. Although it probably does not breach LPP, lawyers should assess LPP before sharing the arrangement number with other intermediaries
  • Clients can waive LPP, but lawyers cannot
  • Privilege can be waived at any time, but it should be waived unambiguously and in writing
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Any company that undertakes international tax arrangements could be affected by DAC6. Reports may be made by professional advisers, known as “intermediaries”, that advise on the arrangements, but where an arrangement is organised in-house or the intermediary cannot report for another reason, the responsibility falls on the taxpayer to file their own report.

VinciWorks has been in close consultation with HMRC, other tax regulators and over 100 leading international firms to establish the implications of the EU Directive and build a reporting solution to help businesses comply.

In this webinar, we covered the core features of our software and shared guidance on how international businesses can use it to report and track transactions.

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HMRC has completed a draft of its XML schema for making automated DAC6 reports. When DAC6 comes into force HMRC will allow reporting by one of two methods:

  • XML file upload – This method is expected to be available from 1 July 2020
  • Manual data entry – We do not yet have an exact date for when this method will be available but it is expected shortly after 1 July

The schema that HMRC has drafted forms the basis of the first method. It specifies how automated XML reports should be structured and details the required information. 

The schema has already been incorporated into VinciWorks’ DAC6 Reporting Tool.

Click here to download HMRC’s XML schema

The link provides three documents:

  • The schema
  • Technical User Guide
  • Data relationship diagram

The technical team at VinciWorks has reviewed the schema in depth. After comparing it to a number of existing schemas, they have determined that HMRC’s schema is similar to other EU countries.

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On 25 May 2018, the Economic and Financial Affairs Council of the European Union (ECOFIN) adopted the 6th Directive on Administrative Cooperation, requiring so-called tax intermediaries to report certain cross-border arrangements that contain at least one of the categories, known as hallmarks, that are defined in the Directive. This directive is commonly known as DAC6.

DAC6 aims to clamp down on aggressive tax planning and is set to impose a huge compliance burden on taxpayers and their advisers, potentially even in circumstances where there is no tax benefit at all.

DAC6 will affect many firms including law firms, accounting firms and other tax advisers, referred to in the Directive as “intermediaries”. However, while the primary reporting onus is on professional advisers, known as “intermediaries”, a taxpayer might be required to report a DAC6 arrangement in circumstances where no intermediary is able to report. This might include situations where no external intermediary is involved, all intermediaries are based outside of the European Union, or an intermediary is exempt from reporting due to legal professional privilege. 

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DAC6 guide to country-by-country implementation

The DAC6 compliance requirements of global businesses vary from country to country. Not all EU member states have yet finalised their guidance and additional details, such as legal professional privilege and penalties vary between each state. To help firms save time and money on conducting their own research, VinciWorks has collaborated with Transfer Pricing Services to create a concise country-by-country guide to DAC6 compliance. The guide can be purchased either together with our DAC6 compliance solution or as a standalone tool.

The guide is regularly updated as member states across the EU consider how they will implement the Directive. The latest update to the guide includes:

  • Timeline section: This new section highlights critical dates for each EU Member State including deadlines for reporting and notifications periods for intermediaries.
  • Main Benefit Test: This section has been expanded to include more details of the main benefit test and the definition of a tax advantage in each EU Member State.
  • Form of reporting: This section has been expanded and divided into separate subsections to detail the form of reporting and language of reports, together with any other important information necessary to make valid reports in each EU Member State.
  • New information based on current guidance: Many countries also have new information based on the latest guidance published in each Member State. We will continue to update this on a regular basis.

Preview the guide

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DAC6 is a new EU tax directive designed to reduce tax avoidance through new mandatory reporting requirements. Once reporting requirements begin, any company that undertakes international tax arrangements could be affected by DAC6.

In this webinar, Director of Best Practice Gary Yantin and Legal and Research Executive Ruth Mittelmann Cohen take us through multinational taxpayers’ responsibilities with regards to reporting cross-border transactions in line with DAC6.

The webinar covers:

  • A brief introduction to DAC6 and how it affects multinationals and large businesses
  • Multinationals’ responsibilities and when they need to report
  • How to keep track of your intermediaries and their reporting
  • How VinciWorks’ DAC6 reporting solution can help multinationals stay on top of DAC6 compliance

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DAC6 is a European regulation aimed at reducing international tax evasion and promoting transparency. DAC6 requires lawyers, accountants, tax advisers, bankers and other “intermediaries” to report some aggressive cross-border tax arrangements. These “mandatory disclosure requirements” (MDRs) are relevant for tax transactions that cross EU borders in which it seems that the primary purpose of the transaction is a tax advantage.

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For the past year, we have researched DAC6 in-depth, consulted with HMRC, hosted meetings with over 100 law firms, collaborated with international tax experts and built a DAC6 reporting tool. The tool features workflows designed and updated for the intricacies of each EU member state’s implementation of DAC6.

In this webinar we answered some of the most common questions we receive about DAC6 workflows and how those workflows can be implemented in the DAC6 reporting tool.

These questions include:

  • How do I set up reporting deadline reminders?
  • How do I deal with multiple jurisdictions?
  • How does on-premises hosting work?
  • How do I manage XML schemas?
  • When is the 30-day reporting period triggered?
  • How to deal with multiple jurisdictions
  • How to customise forms and dashboards to suit your firm and staff

During the meeting, we demonstrated how our tool can be used to manage any workflow and solve many of the coordination and compliance challenges that DAC6 poses. You can request a recording or book a demo by clicking the button below.

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In their latest draft guidance, HMRC have provided some additional clarity in relation to reporting triggers (note: this may still be subject to change). Vinciworks has summarised the additional clarifications below, along with explanations and examples:

Reporting triggers for promoters

There is a requirement for promoters to make a relevant report within 30 days of the earliest of:

  1.  The day after the arrangement is made available for implementation
  2.  The day after the arrangement is ready for implementation
  3.  When the first step in the implementation of the arrangement has been made
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