Cross-border tax obligations

New Compliance Measures

Directive 2018/822, aimed at enhancing tax transparency to combat aggressive tax planning, was adopted by the Council of the European Union.

It entered into force on June 25, 2018 and had to be transposed by December 31, 2019.

The directive requires the reporting of “cross-border arrangements” to tax authorities. This therefore applies only to arrangements or series of arrangements involving either multiple EU Member States or an EU Member State and a third country.

Triggering the Reporting Obligation

The obligation to report cross-border arrangements is triggered by the presence of one or more “hallmarks” listed in Annex IV of the directive. These hallmarks are intended to signal a potential risk of tax avoidance.

According to the directive, a hallmark indicates such a risk if it can be established that the main benefit a person may reasonably expect to obtain from the arrangement is a tax advantage. Among the hallmarks related to the main benefit criterion are general hallmarks, such as arrangements that include confidentiality clauses vis-à-vis other intermediaries or tax authorities.

Who Must Report?

As a general rule, the reporting obligation falls on the “intermediary” who is tax-resident in the EU, has a permanent establishment in the EU, or meets other EU-related connection criteria.

In practice, the term “intermediary” mainly refers to financial and tax advisors, but it is broadly defined under the directive. As a result, any person providing advice to a taxpayer may be considered an intermediary under the directive if their skills and expertise allow them to recognize that the arrangement falls within the scope of the directive.

Our Assistance

The Subirats Avocat firm is available to provide detailed guidance on:

• the scope of the directive,
• the procedures to follow,
• and the information that must be reported.

For reference, the provisions of the directive will apply from July 1, 2020, with a retrospective component.