DAC 6 reporting delayed due to COVID-19

Tax Hot Topics newsletter The European Commission (EC) has agreed to delay the entry into force of certain European Union (EU) taxation measures as a result of COVID-19. Among these is the delay of Council Directive 2018/822, commonly known as the Directive on Administrative Cooperation 6 (DAC 6).

In general, DAC 6 was implemented to enhance transparency among member states and to curtail the design and implementation of harmful tax structures. The rules introduced a mandatory disclosure and exchange of information regime for cross border arrangements that fall within certain “hallmarks” outlined in the directive. The hallmarks include tax-motivated transactions where a person may reasonably expect to derive a tax benefit, as well as non-tax transactions that may have a potential tax impact but are reportable regardless of whether there is a tax advantage to the transaction.

The rules under DAC 6 are set to become applicable on July 1, 2020, with mandatory reporting requirements initially due in August 2020. However, the EC recently agreed to a six-month delay of the initial reporting deadlines as a result of COVID-19. While the beginning of the application of DAC 6 will remain July 1, 2020, the reporting requirements would be delayed. Initial reporting of historical applicable arrangements where the first step of implementation was made from June 25, 2018 to June 30, 2020, now would be reportable by Feb. 28, 2021.

Under its “Proposal for a Council Directive amending Directive 2011/16/EU,” the EC also reserved its right to further defer the reporting deadline. Specifically, the EC would delay further if severe risks to public health caused by COVID-19 continued during the initial delay period, and member states must implement lockdown measures.

Now that EC has reached unanimous agreement by the EU member states, the rule must be adopted locally by amending or supplementing existing member state laws. Taxpayers should note that the deferral does not affect the substantive reporting requirements of DAC 6, only the deadlines of the reporting obligations are affected. The EC also will delay the application of its value added tax e-commerce package by six months. The delay gives member states and businesses more time to prepare for the new rules.

David Sites
Washington National Tax Office
T +1 202 861 4104

David Zaiken
Managing Director
Washington National Tax Office
T +1 202 521 1543

Cory Perry
Senior Manager
Washington National Tax Office
T +1 202 521 1509

Yasmin Dirks
Washington National Tax Office
T +1 202 521 1506

Mike Del Medico
Washington National Tax Office
T +1 202 521 1522

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.