It was introduced into national legislation Directive MDR 6 by Order 5 of 31.01.2020.
The Council of the European Union has adopted Directive 2018/822 on mandatory reporting and exchange of information on cross-border tax arrangements. According to the Directive, the first reporting of cross-border arrangements to the national tax authority must take place by August 31, 2020 and the first exchange of information between the competent authorities of the EU Member States is due on October 31, 2020.
Each company or intermediary will have to notify the reportable transactions to the tax authorities. Subsequently, the tax authorities in each Member State will transmit this information to a platform developed at European level, so that they will be more able to respond to abusive fiscal practices through legislative changes.
The intermediary is defined as: means any person that designs, markets, organises or makes available for implementation or manages the implementation of a reportable cross-border arrangement.
MDR 6 provides a series of criteria on the basis of which the reportable cross-border transactions are identified. According to MDR 6, the reporting covers all taxes, except value added tax (VAT), customs duties, excise duties and compulsory social security contributions.
Below are examples of “distinctive signs” according to each section (from the statement):
– section A: The entity from a Member State that implements and designs a cross-border modality / cross-border arrangement. It may be part of a professional association (legal, fiscal, consulting), but it is not mandatory. Where a legal clause of professional secrecy applies, the obligation passes to the relevant taxpayer.
– section B: acquisition of a loss-making company; conversion of income into capital or income with a more favorable tax regime;
– section C: cross-border payments deductible to associated companies (when received) at a tax rate of 0 or close to 0, a complete exemption or a preferential tax regime; payments to an associate in a non-cooperating jurisdiction.
– section D: undermining of EU law or any equivalent agreement regarding the automatic exchange of information on financial accounts; real entity or beneficiaries – non-transparent.
– Section E: special unilateral preferential rules in the field of transfer pricing; transfer of intangible assets difficult to evaluate.
In order to be an intermediary, a person shall meet at least one of the following additional conditions:
(a) be resident for tax purposes in a Member State;
(b) have a permanent establishment in a Member State through which the services with respect to the arrangement are provided;
(c) be incorporated in, or governed by the laws of, a Member State;
(d) be registered with a professional association related to legal, taxation or consultancy services in a Member State.
The information to be communicated by the competent authority of a Member State under paragraph 13 shall contain the following, as applicable:
(a) the identification of intermediaries and relevant taxpayers, including their name, date and place of birth (in the case of an individual), residence for tax purposes, FIN and, where appropriate, the persons that are associated enterprises to the relevant taxpayer;
(b) details of the hallmarks set out in Annex IV that make the cross-border arrangement reportable;
(c) a summary of the content of the reportable cross-border arrangement, including a reference to the name by which it is commonly known, if any, and a description in abstract terms of the relevant business activities or arrangements, without leading to the disclosure of a commercial, industrial or professional secret or of a commercial process, or of information the disclosure of which would be contrary to public policy;
(d) the date on which the first step in implementing the reportable cross-border arrangement has been made or will be made;
(e) details of the national provisions that form the basis of the reportable cross-border arrangement;
(f) the value of the reportable cross-border arrangement;
(g) the identification of the Member State of the relevant taxpayer(s) and any other Member States which are likely to be concerned by the reportable cross-border arrangement;
(h) the identification of any other person in a Member State likely to be affected by the reportable cross-border arrangement, indicating to which Member States such person is linked.
Generic hallmarks under category A and specific hallmarks under category B and category C may only be taken into account where they fulfil the “main benefit test”.
That test will be satisfied if it can be established that the main benefit or one of the main benefits which, having regard to all relevant facts and circumstances, a person may reasonably expect to derive from an arrangement is the obtaining of a tax advantage.
Eduard Pavel – Tax Partner