Mandatory disclosure of information to Tax Authorities about cross-border tax arrangements

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On 25 June 2018, the EU so-called mandatory disclosure measure will enter into force. Under this measure, intermediaries such as tax advisers and accountants, are obliged to report information about certain cross-border tax arrangements. The mandatory disclosure applies to arrangements which will be implemented from 25 June 2018.

What arrangements have to be reported?

Only information on cross-border tax arrangements with certain hallmarks has to be reported. Examples of arrangements to be reported are:

  • payments between associated enterprises that are deductible for tax purposes in the country of the payer, but are not or barely taxed in the country of the receiver of such payment;
  • an enterprise in a country transfers a hard to value intangible asset to an associated enterprise in another country.

Who is obligated to report to whom?

The intermediary who has designed or organized the arrangement has to report this to the Tax Authorities of the country where the intermediary resides. The obligation is not only applicable to tax advisers, but also to other intermediaries. In some cases where a lawyer is engaged, the tax payer is obliged to report the arrangement.

What information has to be reported?

The name of the tax payer(s) and the intermediary, the date of implementation of the arrangement and a summary of the tax arrangement. The advice itself does not have to be reported.

When does the information have to be reported?

Reporting must take place within thirty days after the intermediary has made the arrangement available or within thirty days after the arrangement has been implemented.

The actual reporting obligation will only apply from 1 July 2020, but from 25 June 2018 the intermediary must keep a record showing which arrangements the intermediary has been involved in.

Consequences

Under the mandatory disclosure measure, an intermediary is possibly obliged to report certain information about clients if the intermediary is involved in a cross-border tax arrangement. Non-compliance with this measure could lead to a high penalty.

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