The Swedish Government issued, on 4 February 2020, a final bill to Parliament implementing the European Union (EU) Directive on the mandatory disclosure and exchange of cross-border tax arrangements (referred to as DAC6 or the Directive).
An earlier draft was issued in December 2019, the final legislation is expected to be enacted in March 2020, and penalties apply after it goes into force July 1, 2020.
EU Member States were to adopt and publish national laws required to comply with the Directive by 31 December 2019. Sweden did not meet this deadline. This major miss of the OECD deadlines for a complex, subjective and arguably far-reaching disclosure legislation brings forth the question: Why is there not a similar delay for implementation by taxpayers and reporting parties? Unfortunately, the OECD has not provided any comments on this mismatch of Member State responsibilities and taxpayer obligations.
The scope of the taxes covered under the Swedish new draft legislation is fully aligned with the Directive and applies to all taxes except VAT, customs duties, excise duties and compulsory social security contributions.
In accordance with DAC6, the main benefit test (MBT) will be satisfied if it can be established that the main benefit or one of the main benefits which, having regard to all relevant facts and circumstances, a person may reasonably expect to derive from an arrangement, is the obtaining of a tax advantage.
The Government’s explanatory notes indicate that a “tax advantage” includes a tax advantage outside of Sweden (and there is no suggestion that such tax advantage must arise in respect of EU taxes).
The Government further concludes that there is no requirement that the tax advantage occurs during the current fiscal year, it can occur also in the future, for example, in the form of deferred taxation. It states, however, that it must be a tax advantage based on current rules.
DAC6 is complex, subjective and frustrating as each Member State applies their own interpretation of the final rules, as well as reporting formats.
Taxpayers with operations or transactions affecting Sweden, or other Member States, will likely over-report transactions for the initial period, and hope for further clarifications in the near future. However, penalty consequences are so significant with respect to each (subjective) reportable arrangement that some companies may find it difficult to prove the negative – that each arrangement was reported timely.