World Wide Tax News Issue 55 - June 2020

Exchange of information: DAC6 – The time to act is now

The 1 July 2020 deadline for reporting cross-border arrangements under the EU DAC6 directive is almost here. A proposal by the European Commission to postpone the filing deadline by six months will likely only become optional for Member States, and has not (yet) been accepted by the European Council. This means that Member States must continue to observe the original timeframe, and may continue to do so in case the postponement is accepted. More than ever, it is therefore time to act in order to become DAC6-compliant on time.

DAC6 reporting obligation

Under the DAC6 directive, a reporting obligation exists when:

  • It concerns an arrangement
  • Which is cross-border
  • Which contains at least one of the Hallmarks.


The term “arrangement” is not defined, and could encompass everything from a regular transaction to an elaborate tax planning structure. It is therefore hardly conceivable that a transaction would not be reportable because it would not be an “arrangement”.


The arrangement has to be cross-border. This means that at least one EU Member State and either another EU Member State or a third country must be involved. This involvement could be through a subsidiary, through a permanent establishment, or even without a taxable presence in the other state, by performing an activity there.


There is only a reporting obligation if the cross-border arrangement also satisfies at least one of the Hallmarks.

These Hallmarks are listed in Annex IV of the DAC6 Directive. The Hallmarks are characteristics or features of cross-border arrangements that present an indication of a potential risk of tax avoidance. Some of these Hallmarks are linked to the so-called main benefit test, which means that the arrangement will only be reportable if, having regard to all relevant facts and circumstances, the main benefit or one of the main benefits which a person may reasonably expect to derive from an arrangement is the obtaining of a tax advantage.

However, arrangements that are not set up with the aim of avoiding taxes could also be reportable based on one of the Hallmarks, as not all Hallmarks are subject to the main benefit test. One example of this is the Hallmark that states that a cross-border arrangement is reportable when it concerns the transfer of hard-to-value intangibles.

Who has to report?

The primary reporting obligation lies with intermediaries. An intermediary is defined as any person that designs, markets, organises or makes available for implementation or manages the implementation of a reportable cross-border arrangement. The notion of intermediary is broad and covers accountants, advisors, lawyers, banks, etc. In principle, all intermediaries involved are obliged to report an arrangement, except when the intermediary has proof (in accordance with national law) that the same information has already been reported by another intermediary, the reporting obligation would breach legal professional privilege, or the intermediary in question is a non-EU intermediary.

In certain cases, the reporting obligation shifts from the intermediary to the relevant taxpayer. The relevant taxpayer is obliged to report information on the arrangement when no intermediary is involved, the reporting obligation would breach the intermediary’s legal professional privilege, the intermediary is a non-EU intermediary and it is not registered with a professional association related to legal, taxation or consultancy services.

What should be reported?

The intermediary or relevant taxpayer has to provide, amongst other things, 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. An intermediary only has to report what he knows - there is no additional research obligation. However, in multiple Member States there is an additional obligation to report on other involved intermediaries, when the intermediary who reported did not report all the required information.

When to report?

From 1 July 2020 it is possible to start reporting, both on new arrangements and arrangements that were implemented, ready for implementation, or of which the first step in implementation has been made in the period from 25 June 2018 onwards. The deadline for reporting on the arrangements in the lookback period is 31 August 2020. If the proposed postponement is accepted by the European Council and enacted in the relevant Member State, this deadline will shift to 28 February 2021.

For new arrangements, the deadline is 30 days after the date that either the arrangement has been implemented, has been made ready for implementation, or when the first step in implementation has been made. Whichever of these three events occurs first determines the date on which the 30-day period will commence.

Compliance with DAC6

In view of the substantial fines that may be imposed by Member States for non-reporting, it is important for intermediaries and taxpayers to be compliant with their DAC6 reporting obligations. Fines vary between Member States in the range from EUR 5,000 to EUR 5,000,000. This means that for each cross-border arrangement it is necessary to determine whether the arrangement is reportable and, if so, who is subject to the reporting obligation for that arrangement. Furthermore, for each arrangement the exact scope of the reporting obligation in the Member States concerned will have to be ascertained, as this may differ substantially from one Member State to another.

Services offered by BDO

More background information about DAC6 and the services offered within the BDO network (e.g. BDO’s DAC6 tool and DAC6 e-learning) can be found on global service page for DAC6 services. A short but comprehensive 24-minute DAC6 webinar can be found here, in which BDO partners and an industry expert discuss how to become DAC6 compliant and provide useful insights from industry.

Niek de Haan

Frederik Boulogne

Nina Berndsen