Cross-border tax transactions continue to come under increasing transparency demands in an effort to detect aggressive cross-border tax planning. These demands are reflected in the automatic exchange of information regimes, and most recently through the latest issuance of the European Union’s Council Directive (EU) 2018/822 published on 25 May 2018, amending Directive 2011/16/EU regarding mandatory automatic exchange of information (referred to as Mandatory Disclosure Regime/MDR) in the field of taxation in relation to reportable cross-border arrangements.
The directive, known as DAC6, which entered into force on 25 June 2018, requires ‘intermediaries’ to report transactions and arrangements that are considered by the EU to be potentially aggressive. Intermediaries include any person with EU nexus that designs, markets, organizes or makes available for implementation, or manages the implementation of, or provides services to the reportable cross-border arrangement.
As jurisdictions implement the regime, EY has continued to highlight developments and provide thought leadership through interacting with stakeholders and local tax authorities as showcased at a recent event on 14 November 2019. The event included a discussion of Ireland’s MDR implementation by Irish Revenue and EY leaders focused on MDR’s affect on the wealth and asset management, banking, and aircraft leasing sectors. Please see the video below for portions of the program and interviews with our Customer Tax Operations and Reporting Services Team.
Reporting obligations are fast approaching. Intermediaries will need to report cross-border reportable arrangements, based on trigger dates for the transition period, by 31 August 2020. In cases where the intermediary is protected by legal professional privilege, the obligation to disclose is transferred to another intermediary (where relevant), and if not, then to the taxpayer. Both intermediaries and taxpayers will need to understand and begin implementation planning for MDR now and understand precedence for reporting between parties in a transaction.
To discuss the potential impact of MDR on your business, please reach out to one of our tax professionals.