For the last years, the European Union has been building up its toolbox in the fight against “aggressive tax evasion”. Following the 2016 scandal around what has been ever since known as the Panama Papers, the European Parliament set up an inquiry committee. The generally called “PANA” committee’s recommendation was approved in plenary in December 2017.
The European Commission went further and proposed a targeted change to the directive on administrative cooperation. On past Tuesday, 13 March, after months of negotiations, the ECOFIN Council came to a political agreement on the text of the directive that is due to be technically adopted once all linguistic versions are finalized.
The directive – generally called DAC 6 – requires intermediaries like tax advisors, accountants, lawyers or financial institutions that design or promote tax planning schemes to report those that would fall under the definition of potentially aggressive. The directive establishes so-called “hallmarks” to identify the schemes that need to be reported to national authorities. A report does not automatically imply that the scheme is harmful or that it constitutes tax avoidance, but only that it might be of interest to tax authorities for potential further investigation.
This information that national authorities receive is then to be automatically exchanged between Member States via a centralized database. Non-compliant intermediaries will be subject to penalties imposed by the directive.
The directive needs to be transposed into national law as of 31 December 2019 and the new reporting requirements will apply as of 1 July 2020.
By Antoine Kremer, Head of European Affairs, ABBL & ALFI