EU mandatory tax disclosure rules in force

HMRC is flagging up changes to the EU mandatory disclosure rules which mean there are new requirements starting this month with intermediaries having to report certain cross border, tax-planning arrangements to tax authorities, in a bid to tackle aggressive tax avoidance

The information will be exchanged between member states on a quarterly basis. Intermediaries will first have to report by 31 August 2020, on any arrangements where the first step has been taken, after the directive enters into force on 25 June 2018.

The EU directive on administrative cooperation applies to any intermediary that designs, markets, organises or makes available for implementation or manages the implementation of, a reportable cross-border arrangement. It also covers those who provide aid, assistance or advice where they can be reasonably expected to know that this is what they have done. If the intermediary is located outside the EU or is bound by professional privilege or secrecy rules, the obligation to report passes to the taxpayer.

Intermediaries are required to report any cross-border arrangement (covering all direct taxes) if it bears the ‘hallmarks’ defined in the directive.

The hallmarks cover a broad range of structures and transactions, including certain deductible payments which are taxed at a rate of zero or nearly zero when received and intercompany transactions which meet specific transfer pricing hallmarks, such as any transfer of hard-to-value intangibles.

Intermediaries must report to the relevant tax authority within 30 days of when the arrangement is made available, is ready for implementation or has been implemented – whichever occurs first, or of when the aid, assistance or advice is provided.

Intermediaries are not expected to carry out additional due diligence and will only have to report information which is in their knowledge, possession or control. 

There are more details about how member states should interpret ‘reasonably expected to know’ in the OECD’s commentary on the mandatory disclosure rules.

HMRC says it will assess the consequences of this directive for the UK and will issue further guidance as appropriate.

OECD disclosure rules for CRS avoidance arrangements and opaque offshore structures are here.

Report by Pat Sweet

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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