As of July 1, 2020, the European Mandatory Disclosure Rules (MDR) / DAC6 directive applies. As a result of the Dutch implementation of this directive, intermediaries and / or taxpayers must report potentially aggressive international tax arrangements to the tax authorities. These are tax constructions involving residents of different countries and may be used to avoid tax.
You can read more about the following topics on this page:
- An intermediary must almost always report a potentially tax-avoidance arrangement
- A taxpayer sometimes has to report a potentially tax-avoidance scheme himself
- Not sure if someone else has already reported a potentially tax-avoidance arrangement?
- When should you report tax-avoidance constructions?
- Which tax arrangements must you report?
- For which taxes does the DAC6 guideline apply?
- How do you report potentially tax-avoidance arrangements?
- What happens if you don’t report it?
An intermediary must almost always report a potentially tax-avoidance arrangement
Are you an intermediary involved in a potentially aggressive international tax construction? Then you must report it.
There are 2 exceptions to this rule. You do not have to report a potentially aggressive international tax arrangement in the following cases:
- Another intermediary has already reported the tax construction. And this intermediary has provided you with a reference number as proof of this.
- You have a right of non-disclosure.
The DAC6 guideline applies to all intermediaries. For example: tax advisers, lawyers, accountants, notaries, financial advisers, banks and trust offices.
A taxpayer sometimes has to report a potentially tax-avoidance scheme himself
The taxpayer for whom a potentially aggressive international tax arrangement is intended must report it himself in the following cases:
- An intermediary from outside the European Union is involved in the tax construction.
- An intermediary involved in the tax construction has the right of non-disclosure, and therefore does not have to report the construction.
- No intermediary is involved at all in the tax construction.
Not sure if someone else has already reported a potentially tax-avoidance arrangement?
If in doubt, it is best to report it yourself.
When should you report tax-avoidance constructions?
The DAC6 guideline has retroactive effect. Therefore, between 1 July 2020 and 31 August 2020, you must report the potentially aggressive international tax arrangements in which you are involved from 25 June 2018 to 1 July 2020.
For structures in which you are involved from 1 July 2020, you must always report within 30 days.
Which tax arrangements must you report?
You will find a detailed list of hallmarks below. If a tax construction has 1 or more of these characteristics, you must report this. For some creature attributes, you only need to report the construction when the main benefit (or one of the main advantages) of the construction is to achieve a tax benefit. A guide with more explanations and examples will be available soon.
The essential characteristics are determined at European level and can therefore sometimes be explained in different ways. Are you unsure whether a tax arrangement is potentially aggressive? Then act on the side of caution and report it anyway.
For which taxes does the DAC6 guideline apply?
- corporation tax
- income tax
- payroll tax
- dividend tax
- inheritance and gift tax
- most other taxes
- VAT (sales tax)
- customs duties
- excise duties
- social insurance contributions
How do you report potentially tax-avoidance arrangements?
With the form ‘Notification Cross Border Arrangements (CBA)’, in English. You can fill in this form via the data portal of the tax authorities. This is possible from 1 July 2020.
In the notification you supply:
- information about yourself
- information about the taxable person and persons associated with him
- a summary of the content of the tax structure
- the relevant essential characteristics
- the relevant national legal provisions
- the value of the tax structure
- the implementation date
- the relevant EU Member States
After you have made a report, you will receive a reference number from us.
What happens if you don’t report it?
Then you risk a (high) fine.
Part I. Main benefit test
Generic hallmarks under category A and specific hallmarks under category B and under points (b)(i), (c) and (d) of paragraph 1 of 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.
In the context of hallmark under paragraph 1 of category C, the presence of conditions set out in points (b)(i), (c) or (d) of paragraph 1 of category C can not alone be a reason for concluding that an arrangement satisfies the main benefit test.
Part II. Categories of hallmarks
A. Generic hallmarks linked to the main benefit test
|1.||An arrangement where the relevant taxpayer or a participant in the arrangement undertakes to comply with a condition of confidentiality which may require them not to disclose how the arrangement could secure a tax advantage vis-à-vis other intermediaries or the tax authorities.|
|2.||An arrangement where the intermediary is entitled to receive a fee (or interest, remuneration for finance costs and other charges) for the arrangement and that fee is fixed by reference to:(a)the amount of the tax advantage derived from the arrangement; or(b)whether or not a tax advantage is actually derived from the arrangement. This would include an obligation on the intermediary to partially or fully refund the fees where the intended tax advantage derived from the arrangement was not partially or fully achieved.|
|3.||An arrangement that has substantially standardised documentation and/or structure and is available to more than one relevant taxpayer without a need to be substantially customised for implementation.|
B. Specific hallmarks linked to the main benefit test
|1.||An arrangement whereby a participant in the arrangement takes contrived steps which consist in acquiring a loss-making company, discontinuing the main activity of such company and using its losses in order to reduce its tax liability, including through a transfer of those losses to another jurisdiction or by the acceleration of the use of those losses.|
|2.||An arrangement that has the effect of converting income into capital, gifts or other categories of revenue which are taxed at a lower level or exempt from tax.|
|3.||An arrangement which includes circular transactions resulting in the round-tripping of funds, namely through involving interposed entities without other primary commercial function or transactions that offset or cancel each other or that have other similar features.|
C. Specific hallmarks related to cross-border transactions
|1.||An arrangement that involves deductible cross-border payments made between two or more associated enterprises where at least one of the following conditions occurs:(a)the recipient is not resident for tax purposes in any tax jurisdiction;(b)although the recipient is resident for tax purposes in a jurisdiction, that jurisdiction either:(i)does not impose any corporate tax or imposes corporate tax at the rate of zero or almost zero; or(ii)is included in a list of third-country jurisdictions which have been assessed by Member States collectively or within the framework of the OECD as being non-cooperative;(c)the payment benefits from a full exemption from tax in the jurisdiction where the recipient is resident for tax purposes;(d)the payment benefits from a preferential tax regime in the jurisdiction where the recipient is resident for tax purposes;|
|2.||Deductions for the same depreciation on the asset are claimed in more than one jurisdiction.|
|3.||Relief from double taxation in respect of the same item of income or capital is claimed in more than one jurisdiction.|
|4.||There is an arrangement that includes transfers of assets and where there is a material difference in the amount being treated as payable in consideration for the assets in those jurisdictions involved.|
D. Specific hallmarks concerning automatic exchange of information and beneficial ownership
|1.||An arrangement which may have the effect of undermining the reporting obligation under the laws implementing Union legislation or any equivalent agreements on the automatic exchange of Financial Account information, including agreements with third countries, or which takes advantage of the absence of such legislation or agreements. Such arrangements include at least the following:(a)the use of an account, product or investment that is not, or purports not to be, a Financial Account, but has features that are substantially similar to those of a Financial Account;(b)the transfer of Financial Accounts or assets to, or the use of jurisdictions that are not bound by the automatic exchange of Financial Account information with the State of residence of the relevant taxpayer;(c)the reclassification of income and capital into products or payments that are not subject to the automatic exchange of Financial Account information;(d)the transfer or conversion of a Financial Institution or a Financial Account or the assets therein into a Financial Institution or a Financial Account or assets not subject to reporting under the automatic exchange of Financial Account information;(e)the use of legal entities, arrangements or structures that eliminate or purport to eliminate reporting of one or more Account Holders or Controlling Persons under the automatic exchange of Financial Account information;(f)arrangements that undermine, or exploit weaknesses in, the due diligence procedures used by Financial Institutions to comply with their obligations to report Financial Account information, including the use of jurisdictions with inadequate or weak regimes of enforcement of anti-money-laundering legislation or with weak transparency requirements for legal persons or legal arrangements.|
|2.||An arrangement involving a non-transparent legal or beneficial ownership chain with the use of persons, legal arrangements or structures:(a)that do not carry on a substantive economic activity supported by adequate staff, equipment, assets and premises; and(b)that are incorporated, managed, resident, controlled or established in any jurisdiction other than the jurisdiction of residence of one or more of the beneficial owners of the assets held by such persons, legal arrangements or structures; and(c)where the beneficial owners of such persons, legal arrangements or structures, as defined in Directive (EU) 2015/849, are made unidentifiable.|
E. Specific hallmarks concerning transfer pricing
|1.||An arrangement which involves the use of unilateral safe harbour rules.|
|2.||An arrangement involving the transfer of hard-to-value intangibles. The term “hard-to-value intangibles” covers intangibles or rights in intangibles for which, at the time of their transfer between associated enterprises:(a)no reliable comparables exist; and(b)at the time the transaction was entered into, the projections of future cash flows or income expected to be derived from the transferred intangible, or the assumptions used in valuing the intangible are highly uncertain, making it difficult to predict the level of ultimate success of the intangible at the time of the transfer.|
|3.||An arrangement involving an intragroup cross-border transfer of functions and/or risks and/or assets, if the projected annual earnings before interest and taxes (EBIT), during the three-year period after the transfer, of the transferor or transferors, are less than 50 % of the projected annual EBIT of such transferor or transferors if the transfer had not been made.|