The sixth version of the EU Directive on administrative cooperation, commonly known as DAC6, has been adopted by the Council of the European Union on the 25th May 2018, and transposed into Maltese law by virtue of Legal Notice 342 of 2019, on the 17th December 2019.
EU Council Directive 2018/822/EU aims to provide tax authorities of the Member States, with additional information in order to assist them to more rapidly close perceived loopholes in tax legislation and harmful tax practices.
The Directive imposes certain reporting obligations on professionals, referred to as intermediaries, whereby ‘intermediaries’ means any person that designs, markets, organizes or makes available for implementation or manages the implementation of a reportable cross-border arrangement.
Intermediaries have, by virtue of the Directive, obligations to report cross-border arrangements which have happened on or after 25th June 2018 affecting at least one EU Member State that fall within one of a number of ‘hallmarks’, that is, a characteristic or feature of a cross-border arrangement that presents an indication of a potential risk of tax avoidance. In a nutshell, intermediaries shall have to report any situations which are identified as potentially indicative of aggressive tax planning.
The reporting obligations fall on intermediaries or, in some circumstances, the taxpayer itself. Intermediaries will therefore need to carry out an impact assessment – identifying transactions or structures potentially affected by the hallmarks and considering where reporting responsibility will reside. In addition, they may want to tackle other aspects of their business, which can facilitate in their reporting obligations, such as selecting a tech-solution for capturing these arrangements and tracking them, as well as training their key staff to raise awareness on these obligations.