NNDKP CELF ALERT – Agreement with respect to a proposal intended to increase transparency in order to combat aggressive fiscal arrangements at cross-border level

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On March 13, 2018, the European Council reached an agreement with respect to a proposal intended to increase transparency in order to combat aggressive fiscal arrangements at cross-border level.

Directive 822/2018, colloquially referred to as ”DAC6” is intended to create a fiscal transparency framework and sets forth for entities acting like intermediaries, such as tax advisors, accountants, lawyers and other similar consultants, as well as for the taxpayers who design and/or promote fiscal planning systems, the obligation to report with respect to the systems considered as potentially aggressive.

In accordance with the provisions of DAC6, member states have the obligation to automatically exchange the information they receive through a centralized database. This will make it possible to rapidly identify new risks of tax evasion, and to take measures for preventing the establishment of arrangements with an aggressive fiscal planning component.

Member states will have the obligation to impose sanctions on intermediaries who do not comply with the measures intended to ensure transparency.

DAC6 sets forth the “hallmarks” that help identify the types of transactions that must be reported to the fiscal authorities.

The hallmarks set forth in Annex IV of DAC6 are mainly the following: the confidentiality clause, the costs related to tax benefits, a high degree of standardization of the documentation, the acquisition of companies incurring losses, the conversion of revenues in other categories of revenues subject to a lower tax rate or exempt from taxes, circular transactions facilitating money laundering, cross-border payments deductible if the entity towards which the payment is effected  is not a fiscal resident in any fiscal jurisdiction or the relevant jurisdiction is deemed by the member states/OECD as a non-cooperating jurisdiction or does not set forth any profit tax at a rate equal to zero or almost equal to zero, payments that benefit from an exemption in full or from a preferential tax regime, deductions/exemptions requested in several jurisdictions, significant differences with  respect to the amount treated as payable in the involved jurisdictions, elements that undermine the reporting obligation, carrying out certain transactions involving a non-transparent legal or beneficial ownership chain, the use of  unilateral norms concerning the “safety area”, the transfer of intangible assets difficult to assess, restructuring operations at group level, having as a result significant profit transfers.

Romania has not transposed yet the provisions of DAC6, but just as the other member states, has the obligation to transpose these provisions until December 31, 2019, at the latest.

Nevertheless, cross – border tax optimization schemes designed, traded, organized or managed will be reportable since June 25, 2018, irrespective of the date when the provisions of the EU Directive 2018/822/ are transposed in the national legislation.

Since July 1, 2020, the term established for the reporting obligation is of 30 days from the date on which the first step in the implementation has been made, prepared, or taken, whichever occurs first. With respect to intermediaries, the 30-day term is calculated since the day following the one on which they provided assistance, advice, directly or through other persons, while in case of tradable transactions, the reporting obligation is periodical (every 3 months).

The information subject to reporting will include details related to the intermediaries, taxpayers, hallmarks, the transaction (including details related to value, the date of implementation) the legal grounds provided by the national legislation, member states that may be targeted/affected.

The relevant authority from the state where the reporting was made will communicate the information reported to the authorities of the other member states through an automatic exchange of information that will take place within a term of one month from the end of the quarter during which the information was filed.

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