DAC6 Mandatory Compliance & Reporting
Managing Partner, PHS Cyprus
22 Sep. 2020
Transparency is high on the global agenda for governments looking to counter tax avoidance. Action 12 of
the OECD’s BEPS project, the transparency agenda is looking at cross-border arrangements and the
disclosure of actual transactions undertaken. This concerns not just transactions that are tax-motivated but
also ordinary transactions that may have a “potential tax effect” but are not driven by tax planning motives.
Taxpayers and their advisers are needing to devote an increasing amount of time and resource to
compliance and the provision of information to tax authorities.
What is DAC6?
DAC6 (Directive 2018/822) is a new EU mandatory disclosure regime that imposes mandatory reporting of
cross-border arrangements (referred as RCBA). An arrangement will be considered “cross-border” where at
least one of the participants is based in the EU (and regardless of the location of other participants).
Who should care about DAC6?
DAC6 impacts MNEs operating in one or more of the 28 countries (EU27+UK) would be heavily affected.
DAC 6: disclosure requirements for taxpayers and intermediaries
The reporting obligations fall on “intermediaries” or, in some circumstances, the taxpayer itself. The
information reported will be contributed to a central directory accessible by the competent authorities of the
It might be thought that this is about aggressive tax planning, but the way the Directive has been drafted
means that it potentially also applies to standard transactions with no particular tax motive.
An intermediary is any person:
- that designs, markets, organizes or makes available for implementation or manages the
implementation of an RCBA); or
- that provides, directly or by means of other persons, aid, assistance or advice with respect to
designing, marketing, organizing, making available for implementation or managing the
implementation of an RCBA.
To simplify it, intermediaries are:
- Consultants, accountants, financial advisers, lawyers.
- Banks, trust companies, insurance intermediaries.
- Holding companies.
An arrangement may be “reportable” where it contains at least one of the “hallmarks” as illustrated below:
- Hallmark category “A”: commercial characteristics seen in marketed tax avoidance schemes;
- Hallmark category “B”: arrangements such as the contrived acquisition of loss-making companies, the conversion of income into capital or other forms of income, or so-called circular transactions;
- Hallmark category “C”: arrangements that give rise to tax deductions without a corresponding amount of taxable income, to certain double reliefs or deductions, or other mismatches;
- Hallmark category “D”: arrangements that have the effect of undermining the CRS or the rules on identification of beneficial ownership;
- Hallmark category “E”: arrangements concerning transfer pricing.
What needs to be reported?
The information to be reported is listed in the Directive and includes the following:
- Identification of all taxpayers and intermediaries involved, including
o Tax residence.
o Name, date and place of birth (if an individual).
o Tax Identification Number (TIN).
- Details of the relevant applicable hallmark(s).
- A summary of the arrangement, including (in abstract terms) a summary of relevant business activities.
- The date on which the first step in implementation was or will be made.
- Details of the relevant local law.
- The value of the cross-border reportable arrangement.
- Identification of relevant taxpayers or any other person in any Member State likely to be affected by the
The first exchange of information on reportable cross-border arrangements between EU Tax Authorities,
will likely take place on 30 April 2021.
DAC6 will affect Cypriot companies or Cypriot permanent establishments of foreign companies with
cross-border transactions. Due to the fact that large penalties are imposed, even where it is
determined that no transactions are reportable, Cypriot companies should act the soonest.
If you want to work with professionals who provide exceptional quality standards of services in Cyprus, the simplest way is to fill in this contact form.
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If you want to work with professionals who provide exceptional quality standards of services in Cyprus, the simplest way is to fill in the contact form below.
We will take you through a step by step process from A to Z in creating the perfect business structure in Cyprus.
Can’t wait any longer? Become even more successful by working with accountants you can count on and be among the thousands business that already did.