DAC6 is coming.<\/p>\n\n\n\n
This mandatory disclosure regime affects all multinational companies with business operations in the European Union (EU). It also applies to these companies\u2019 tax-planning intermediaries including banks, law firms, and tax advisory firms.<\/p>\n\n\n\n
DAC6 is intended to increase transparency and curtail tax evasion. It requires companies to report cross-border tax arrangements that impact at least one EU country and meet certain criteria known as hallmarks. Tax advisory firm Deloitte<\/a> has said DAC6 \u201crepresents one of the most significant changes for tax advisors, service providers, and taxpayers in recent years.\u201d<\/p>\n\n\n\n Failure to comply with the new requirements can lead to significant fines and reputational risk; but, as a recent Thomson Reuters webinar made clear, compliance is complicated. The webinar, Non-Compliance is Not an Option: DAC6 is Here \u2014 Why it\u2019s Important to Get it Right<\/em><\/a>, featured panelists Dickson Alfred, senior solution consultant at Thomson Reuters; Carol Chamberlin, managing director at Orbitax; and Orbitax CEO Gratian Joseph.<\/p>\n\n\n\n While the EU directive establishes minimum reporting requirements, each of the 27 EU member states can implement local variations and additional obligations. For example, DAC6 addresses direct taxes and international arrangements, but some jurisdictions are expanding its reach to value-added taxes (VAT) and domestic arrangements.<\/p>\n\n\n\n \u201cThere are certainly challenges when it comes to complying with DAC6, and at first blush it could all be very daunting,\u201d Orbitax\u2019s Joseph noted. \u201cNot only do you have to report separately to as many as 27 countries, but each country is allowed to implement its own rules, its own reporting forms and reporting formats, and its own specifications for transmitting the completed forms to the tax authority.\u201d<\/p>\n\n\n\n Chamberlin agreed, citing two examples. \u201cPoland greatly expanded the reporting requirements to cover\u2026 not just cross-border arrangements but also domestic arrangements,\u201d she said. \u201cIt also covers VAT. There\u2019s a great deal more (information that filers must provide to the Polish government) in each report than the EU directive specifies.<\/p>\n\n\n\n \u201cAlong those lines, we\u2019ve gotten an initial look at the Netherlands reporting scheme, and they seem to want an actual organizational chart of the entities involved in (reportable cross-border arrangements),\u201d she added.<\/p>\n\n\n\n While the new rules go into effect July 1, the first reports are due from taxpayers and intermediaries on July 30 and must cover all reportable cross-border tax arrangements that occurred during the previous two years.<\/p>\n\n\n\n Annual reports of transactions associated with arrangements are due in December. Here again, countries\u2019 rules deviate from the EU directive\u2019s reporting requirements. \u201cThere is a lot of nuance here, and a lot of country-specific application that needs to be addressed when you\u2019re thinking about your cross-border arrangements,\u201d Chamberlin explained, adding that after the initial submission in July, cross-border tax arrangements that meet the filing criteria must be reported no more than 30 days after they are ready for implementation.<\/p>\n\n\n\n Thomson Reuters\u2019 Alfred noted that from now through July, corporate taxpayers are expected to focus on the one-time project of fulfilling retroactive reporting requirements. After that, they will need systems and processes to manage these reporting obligations on an ongoing basis.<\/p>\n\n\n\n Chamberlin agreed. \u201cThere is much to be considered prior to that first due date, especially since the retroactive look-back covers arrangements going back to June 25, 2018,\u201d she said. \u201cThen, there needs to be some business-as-usual process built into the compliance function in every company. Every 30 days you could have a reporting requirement.<\/p>\n\n\n\n \u201cIf (your company has) discussed a possible arrangement that meets the hallmarks, then you could have 30 days to report that,\u201d she added. \u201cYou need a process to identify those reportable cross-border arrangements and be ready to report within that 30-day period.\u201d<\/p>\n\n\n\n The operational challenges are steep for corporate tax departments, Joseph said. \u201cThere\u2019s the frequency of the reporting given that each reportable cross-border arrangement has to be submitted separately,\u201d he said. \u201cYou could be reporting a lot more frequently than just once a year and to multiple jurisdictions.\u201d<\/p>\n\n\n\n Andbecause you are reporting on arrangements within 30 days of them becoming ready for implementation, there is no existing data source that you can leverage, he observed. \u201cFor example, the required data cannot be downloaded from an [Enterprise Resource Planning] ERP system, because you will need to report before that data has made its way into the ERP system,\u201d Joseph said.<\/p>\n\n\n\n Indeed, data collection may require a wide-ranging scavenger hunt. \u201cThe data you are looking for (covers) things like planned M&A transactions, proposed cross-border payments, movement of personnel, various treasury activities, changes in business activities that could have transfer pricing implications,\u201d Joseph explained. \u201cThese could all be decisions that are being made outside of the tax department, and you want a way to gain access to the right people within the multinational enterprise and ask them basic, but timely, questions to determine whether (business activities) being planned could rise to the level of a reportable cross-border arrangement.\u201d<\/p>\n\n\n\n Corporate tax specialists, he said, will be required to \u201canalyze the data to determine if it needs to be reported, determine which country to report it to, populate the form, generate the (extensible markup language), and transmit to the tax authority \u2014 and do this all within 30 days of the plan being ready for implementation.\u201d<\/p>\n\n\n\n Orbitax recommends taxpayers start in a \u201cpre-arrangements stage\u201d to gather data needed to identify reportable activity. Steps may include the following:<\/p>\n\n\n\n An automated reporting solution can support a \u201cwell-defined workflow to take you from data collection to filing,\u201d Joseph noted, adding that this would include a database of country-by-country rules and the ability to automatically apply hallmarks, identify reportable cross-border arrangements. and filter requirements by due date and reporting jurisdiction.<\/p>\n\n\n\n And keep in mind that this may be just the beginning, because non-EU countries, including Mexico and Norway, are exploring similar reporting regimes of their own.<\/p>\n\n\n\n The sixth version of the European Union\u2019s Directive on Administrative Cooperation \u2014 commonly referred to as DAC6 \u2014 brings new corporate tax reporting obligations into full force on July 1.…<\/p>\n","protected":false},"author":132,"featured_media":71,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[687,659],"tags":[785,786],"insight_job_role":[],"insight_practice_area":[],"class_list":["entry","author-adminwilkins","post-70","post","type-post","status-publish","format-standard","has-post-thumbnail","category-global-reporting-compliance","category-global-tax-reporting","tag-corporate-tax-reporting","tag-dac6","hentry"],"acf":[],"yoast_head":"\nReporting requirements vary from country to country<\/strong><\/h2>\n\n\n\n
Looking back & looking ahead<\/strong><\/h2>\n\n\n\n
Data management obstacles<\/strong><\/h2>\n\n\n\n
Develop workflow processes<\/strong><\/h2>\n\n\n\n
\n\n\n\nYou can access the webinar, <\/strong>Non-Compliance is Not an Option: DAC6 is Here \u2014 Why it\u2019s Important to Get it Right<\/strong><\/a>, here. And to examine possible solutions to <\/strong>DAC6 reporting compliance<\/strong><\/a>, click here.<\/strong><\/h3>\n","protected":false},"excerpt":{"rendered":"