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DAC 6 reporting delayed due to COVID-19

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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.

Contacts:
David Sites
Partner
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
Manager
Washington National Tax Office
T +1 202 521 1506

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

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