Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘reportable transaction’

Spain: Mandatory disclosure +

On 20 June 2019, the Spanish Government published draft legislation and draft guidance addressing the implementation of the European Union (EU) Directive on the mandatory disclosure and exchange of cross-border tax arrangements (referred to as DAC6 or the Directive). Under DAC6, taxpayers and intermediaries are required to report cross-border reportable arrangements from 1 July 2020. However, reports will retrospectively cover arrangements where the first step is implemented between 25 June 2018 and 1 July 2020.

Comments are requested by July 12, 2019.

Key highlights

  • The scope of taxes covered is not broader than the Directive.
  • The definition of reportable arrangements does not include domestic arrangements.
  • In addition to Hallmarks A-E included in DAC6, Spain’s draft guidance also includes additional information on the interpretation and application of these hallmarks.
  • The definition of intermediaries is not broader than the definition in DAC6.
  • The Spanish draft legislation includes an annual reporting obligation, detailing the use of reportable cross-border arrangements that have already been reported before any tax authority. This obligation is not required under the Directive. The draft legislation includes a list of nexus thresholds with Spain which give rise to this obligation.
  • Penalties for failures to report are expected to apply and will range between €3,000 and up to the maximum of the fees received/agreed or the value of the tax impact of the arrangement.
  • Intermediaries are exempt from the obligation to report where the reporting obligation would breach legal professional privilege (LPP). LPP is foreseen both for lawyers and other intermediaries, but only in limited cases. If there are no EU intermediaries which can report, the obligation will shift to the taxpayer.
  • The Spanish Tax Authority will publish on its website, for information purposes, the most relevant reported cross-border arrangements as well as the tax information related to the applicable regime or characterization of such cases.

Multinationals with cross-border transactions subject to such reporting should review Spain’s proposals, as well as monitor other EU Member States for additional obligations not required under the Directive. 

EY’s Global Tax Alert provides additional details, for reference.

https://www.ey.com/Publication/vwLUAssets/Spain_issues_draft_mandatory_disclosure_regime_legislation/$FILE/2019G_003011-19Gbl_Spain%20issues%20draft%20mandatory%20disclosure%20regime%20legislation.pdf

BEPS Action 12-Mandatory Disclosure: TEI comments

Tax Executives Institute (TEI) has provided comments to the issuance of BEPS Action 12 Discussion Draft.

A link to TEI’s comments is provided for reference:

http://tei.org/Documents/TEI%20Comments%20BEPS%20Action%2012%20-%20Mandatory%20Disclosure%20-%20FINAL%20to%20OECD%2029%20April%202015.pdf

Key comments:

  • Multiple levels of disclosure options are provided, leading to inconsistency and complexity
  • Information provided is yet another compliance burden for MNE’s, with little cost/benefit to tax authorities
  • Concern about release of information to the public, especially prior to the time that full appeals are exhausted
  • Tax disclosure should only be required upon filing a tax return with a tax benefit from a reportable transaction
  • Limited rules re: who should report
  • Primary purpose or de minims filter process is not recommended
  • Reporting should be limited to new or innovative aggressive tax planning structures
  • Countries with criminal liability provisions should exclude reported transactions with self-incrimination protection
  • Penalty protection for reported transactions

TEI’s comments are well written, concise, practical and relevant.  Their comments should be carefully reviewed prior to implementation of additional disclosures re: BEPS Action 12 that may prove to have little benefit and significant complexity.

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