Tax Flash no.17/2020 – The deadlines for the reporting of cross-border arrangements under Directive DAC 6 are closing in
05.11.2020 – We remind you that the deadlines for the reporting of cross-border arrangements under Directive DAC 6 are closing in
- In addition to all the “usual” year-end closing works, the beginning of 2021 also brings the obligation to report cross-border arrangements, based on Directive (EU) 2018/822/EC (“DAC 6”), as implemented in Romania by Government Ordinance no. 5/2020.
- Through this material we would like to remind you of both the reporting deadlines and present a series of aspects to be considered when preparing the reports.
- Government Emergency Ordinance 107/2020 established the following deadlines regarding the submission of the reports:
- 31 January 2021 is the deadline for reporting cross-border arrangements made available for implementation or ready for implementation or for which the first step in the implementation process was carried out between 1 July 2020 and 31 December 2020.
- 28 February 2021 is the deadline for reporting reportable cross-border arrangements starting with 25 June 2018 until 30 June 2020.
- 30 April 2021 is the deadline by which intermediaries must submit the first report on marketable arrangements.
What needs to be reported?
Cross-border arrangements presenting an indication of a potential risk of tax avoidance are reportable. Fulfillment of any of the hallmarks provided in annex no. 4 of Ordinance 5/2020 triggers the reporting obligation.
In general, cross-border arrangements involving:
- tax benefits at the level of the participants or the group (for example deductibility in Romania and full exemption or a preferential tax regime in the jurisdiction where the recipient is resident for tax purposes), or
- a pre-established structure, capable of generating tax advantages, or
- confidentiality clauses which may require not to disclose how the arrangement could secure a tax advantage vis-à-vis other intermediaries or the tax authorities; or
- conversion of income into capital or other categories of revenue which are taxed at a lower level or exempt from tax; or
- entities that do not carry out significant economic activity supported by adequate staff, equipment, assets and premises,
are likely to fall under the reporting obligation.
Given the complexity of the distinctive signs, we recommend:
(i) identifying all cross-border arrangements in place since 25 June 2018;
(ii) mapping of transactions according to their classification in one or more of the hallmarks;
(iii) communicating with the intermediaries involved, in order to correlate the approach;
(iv) identifying the transactions for which it is appropriate to explain the economic justification.
A guide on DAC 6 reporting is being developed by NAFA, the provisions of which should also be taken into account when preparing the report.
How to report?
- The reporting is performed by completing and electronically submitting the form provided by Order 1029/2020.
Who must report?
- The report is prepared and submitted by the intermediary or the Romanian taxpayer, as the case may be.
- If the report is submitted in another Member State, it does not have to be submitted in Romania.
What are the non-compliance implications
A fine between 20,000 and 100,000 lei for not reporting or reporting late.
A fine from 5,000 to 30,000 lei for the intermediary’s failure to fulfil the obligation to notify another intermediary or the relevant taxpayer.
In our experience, in multinational groups of companies present in Romania, the reporting strategy and the analysis of transactions take place in a centralized manner. But even in these cases, we recommend the detailed review by the local responsible persons of the analysis performed at group level.
In addition to the fine, other implications must be taken into account, including at the level of the administrators or of the persons in charge with the management of the company.
The Romanian version of this newsletter is available here.