The German tax authority has confirmed to VinciWorks in line with their latest edition of the DAC6 Communication Manual that they will no longer be accepting partial reports in certain cases where legal professional privilege applies. Instead, the taxpayer will be expected to make a complete report.

Reports for non-marketable arrangements will (contra legem) no longer be accepted by the German tax authority. For such arrangements, where there is only one relevant taxpayer and where the intermediary has not been released from their confidentiality obligations, the intermediary cannot report only “arrangement-related” information. In this case, the relevant taxpayer will have to report a complete disclosure.

The following options are currently available for reporting non-marketable tax arrangements:

1. A complete disclosure is made by the relevant taxpayer.
2. The relevant taxpayer releases the intermediary from Legal professional privilege and the intermediary makes the report.

The legal obligation to file a partial report in cases of marketable arrangements still exists.

Finland, who began their DAC6 reporting back in July 2020, have recently confirmed that they will be allowing DAC6 reports to be filed via XML from the end of November 2020.

Until now, DAC6 reports in Finland were required to be submitted via an Excel-based tool. However, the new version of the Finnish reporting portal Ilmoitin.fi is expected to be opened at the end of November 2020 and will enable XML-filing. The XML schema and technical guide will be published once they have been finalised.

Legal professional privilege (LPP) is an extremely complicated topic that requires subject matter expertise. When you add DAC6 regulations to the mix, things get even more challenging. 

Back in June 2020, following consultations with leading counsel, the Law Society released guidance on their approach to LPP and DAC6. A summary of this document can be found here. HMRC has reviewed the Law Society guidance, and while they cannot endorse it, they have said they have no particular concerns about the Law Society’s view. 

On 2 November 2020, HMRC released an updated version of their XSD schema and user guide. HMRC also released a brief note addressing some of the specific queries raised in feedback on the previous draft of the XSD schema.

Here are some interesting points to note:

Reporting Portal

Work is ongoing on the development of the portal for DAC6 reporting. HMRC has set up a dedicated link at gov.uk, from where you will be able to access the UK reporting tool when it goes live. The newly released user guide and documents will also be published there in due course.

Register for our DAC6 email updates

Intermediaries located across Europe breathed a great sigh of relief last month when most EU member states announced they will be postponing their reporting deadlines for DAC6 by 6 months due to COVID-19. This means that DAC6 reporting will be pushed off until 2021.

However, some member states, including Germany, have decided not to adopt the optional deferral and to continue with the original DAC6 timeline. If you are an intermediary that has a legal presence in Germany and were planning on waiting until 2021 to report your historical arrangements in a different EU Member State, think again.

How will Germany’s decision affect intermediaries?

VinciWorks has been in regular contact with member state tax authorities. The German Federal Ministry of Finance (Bzst) has made it very clear that if you or your firm have a German legal presence and have been involved in a reportable DAC6 arrangement since June 2018, then you are required to make any DAC6 reports in Germany without delay.

Mexico is set to implement a new mandatory disclosure regime (MDR) aimed at reducing international tax evasion. The Mexican law is modelled after DAC6, a European directive that requires lawyers, accountants, tax advisers, bankers and other “intermediaries” to report some aggressive cross-border tax arrangements. It is part of a broader OECD initiative to combat tax evasion, known as BEPS Action 12.

Mexico’s mandatory disclosure law will be in force from January 2021, with a requirement to report some historic data. 

For Mexico, this means that businesses will need to enforce transactions that go as far back as January 2020. Businesses who start keeping track of transactions now will find it easier to report transactions when the mandatory disclosure law is in force in Mexico.