Updated 11 May 2020
The European Commission has proposed to postpone the implementation of DAC6 until at least 30 November due to the challenges businesses and regulators are facing with COVID-19.
This proposal is awaiting ratification but will almost certainly be adopted.
Depending on the progression of the coronavirus pandemic over the coming months, the Commission might extend the deferral period one more time, for a maximum of three further months.
The EU Commission’s changes to DAC6 were as follows:
- The definition of ‘historical’ arrangements has not changed; all cross-border arrangements from 25 June 2018 to 30 June 2020 are subject to DAC6
- The date for the reporting ‘historical’ cross-border arrangements (i.e. arrangements that became reportable from 25 June 2018 to 30 June 2020) has changed from 31 August 2020 to 30 November 2020
- Arrangements that become reportable between 1 July 2020 and 30 September 2020 must be reported by 31 October (30 days after 1 October)
- Arrangements that become reportable after 1 October must be reported within 30 days
Watch the video conversation below with VinciWorks’ Director of Best Practice, Gary Yantin and COO, Josh Goodhardt for a detailed analysis of the changes.
How did the postponement happen?
Requests to postpone DAC6 reporting were received by tax authorities in many EU Member States. Stakeholders and industry groups lobbied together to try to push for a delay for DAC6 reports which are due to begin from July 2020 of this year.
The European Commission also received multiple requests for an extension. It was been reported that they are considering “a possible adjustment”, however, the same report quotes the EU Commission stating that “any postponement should thus be of a limited duration and will not affect the start of application of the directive [on July 1, 2020]” .
Who wanted postponement?
There have been several groups of organisations who wrote to tax authorities, including HMRC, asking for a deferment of DAC6 reporting. This includes both law firms and industry trade groups.
The Law Society recently wrote to HMRC asking whether they would consider deferring the commencement dates of DAC6 together with the Trust Registration Service rules in the UK. They cited “the burden they’ll place on both private and public sectors, including law firms”.
In late April ten industry trade groups wrote to the European Commission asking them to suspend DAC6 until 2021. One organisation also demanded the suspension of a separate requirement for reporting bank account information. They note the vast impact the pandemic has had on the finance sector, with staff having less time to ensure implementation. These groups feel that DAC6 was already a very complicated piece of legislation and the pandemic has made it almost impossible to reach full compliance before the current deadline.
CFE Tax Advisers Europe, the Brussels-based association representing European tax advisers, have written a statement to the EU Commission requesting leniency with regards to enforcing penalties for non-compliance. They say that deferring DAC6 will help “mitigate the challenges faced by intermediaries in such circumstances”.
Who was against postponement?
There are also movements against delaying DAC6 coming into force. Some feel that DAC6 will help identify large-scale corporate tax avoidance and delaying it means those cases will continue to go unpunished. They suggest that the unpaid tax income is needed to finance health care and that stopping corporate tax avoidance is now more vital than ever.
Opinions from the Tax Justice Network also disagree with the motion to delay DAC6. Their view is that the finance sector should be prioritizing its ability to ensure governments have the necessary information on the financial holdings of their own residents.
What should we do now?
Regardless of the postponement, DAC6 is not going away. Many firms that we have been speaking to see this period as a time to get their reporting procedures and staff training in place. VinciWorks has consulted tax experts across Europe and brought together over 100 international law and accounting firms to develop best-practice for DAC6. The result is an end-to-end compliance solution for DAC6 that not only fulfils firms’ reporting and training needs, but includes guides, webinars and regular DAC6-focussed newsletters.