DAC6 (EU Council Directive 2018/822 of 25 May 2018 amending Directive 2011/16 / EU as regards the mandatory automatic exchange of information in the field of taxation on cross-border reporting arrangements)
Reporting cross-border arrangements to NAFA (Ordinance no. 5/2020 amending and supplementing Law no. 207/2015 on the Fiscal Procedure Code)
1. Introduction
The Administrative Cooperation Directive (DAC6) entered into force on 25 June 2018. All arrangements that have been implemented, prepared for implementation or whose first stage of implementation has been made in the period after that date are subject to reporting obligations. The requirements are presented in detail below. Agreements that were implemented before June 25, 2018 do not need to be reported.
2. Reporting Obligation
There is an obligation to report when:
- refers to an arrangement;
- the arrangement is cross-border;
- contains at least one of the Hallmarks.
3. Arrangement
The term "arrangement" encompasses everything from a transaction to an elaborate tax planning structure. Therefore, it is difficult to conceive that a particular transaction could not be reported because it is not an "arrangement".
4. Cross-border arrangement
The arrangement must be cross-border which means, involving either more than one Member State or one Member State and one third country.
This involvement in another state could be through a subsidiary, through a permanent establishment, or even without a taxable presence in the other state, by carrying out an activity.
5. Hallmarks
There is an obligation to report only if the cross-border arrangement also contains at least one of the hallmarks. Hallmarks are those features of a cross-border arrangement that show an indication of a potential risk in order to avoid tax obligations. Certain hallmarks are related to the "main benefit test", which means that, even in the event of recognition of those signs, the agreement will not be reportable if, in view of all relevant facts and circumstances, the main benefit or one of the main benefits person can reasonably expect to get them from an arrangement is not to obtain a tax advantage.
However, arrangements that are not set up in order to avoid taxes could also be reportable. An example of this is the inclusion in the reporting object of a cross-border arrangement when it relates to the transfer of intangible assets that are difficult to evaluate.
6. Who should report?
The main reporting obligation lies with intermediaries. An intermediary is defined as any person that designs, markets, organises or makes available for implementation or manages the implementation of a reportable cross-border arrangement. The notion of intermediary is broad and covers accountants, advisers, lawyers, banks, etc. In principle, all intermediaries involved are obliged to report an agreement, unless the intermediary has proof (in accordance with national law) that the same information has already been reported by another intermediary, the reporting obligation would prevent the confidentiality of the intermediary or the intermediary in question is a non-EU intermediary. In some cases, the reporting obligation shifts from the intermediary to the relevant taxpayer. The relevant taxpayer is obliged to report information on the agreement when no intermediary is involved, the reporting obligation would prevent the intermediary from maintaining professional secrecy, the intermediary is a non-EU intermediary and is not registered with a professional association related to legal, tax or consultancy services within the EU.
Implications in Romania:
In the local context, intermediaries who, under regulations, are required to maintain confidentiality (e.g. tax consultants or members of the Chamber of Tax Advisers) can only report cross-border arrangements as a result of requesting and obtaining the taxpayer's consent. Thus, in Romania the reporting obligation belongs to the (relevant) taxpayer.
7. What needs to be reported?
The relevant intermediary or taxpayer must provide, among others, a summary of the content of the cross-border agreement that is the subject of the report, including a reference to the name under which it is commonly known, where applicable, and a description in abstract terms of the relevant activities or trade agreements. An intermediary only needs to report what he knows, there is no additional obligation to investigate / control. However, in several Member States there is an additional obligation to report on other intermediaries involved, if the reporting intermediary has not provided all the necessary information.
8. When to report?
From 1 January 2021 it will be necessary to start reporting, both on the new agreements and arrangements that have been implemented, prepared for implementation or whose first stage of implementation has been done in the period from 25 June 2018. The deadline for reporting agreements during the “recovery” period is February 28, 2021. For new arrangements, the deadline is 30 days from the date on which either the agreement was made available for implementation or was prepared for implementation, either when the first stage of implementation has been done. Any of these three events it happens first, determines the date on which the 30 days period will begin.
Specific implementation in Romania:
It is reported at the “earliest moment” (the moment that occurs first), in which the arrangement is made available.
“Art. 291 ^ 4 - Scope and conditions for mandatory automatic exchange of information on cross-border reporting arrangements
(1) Within 30 days, intermediaries report to the NAFA information, of which they have become aware or which are in their possession or under their control, of the cross-border arrangements covered by the report.
(2) Depending on the moment when any of the following cases occurs first, the term of 30 days from par. (1) begins:
a) from the day following the date on which the cross-border arrangement that is the subject of the report is made available for implementation; or
b) from the day following the date on which the cross-border arrangement that is the subject of the report is prepared for implementation; or
c) from the moment when the first step was taken in the implementation of the cross-border arrangement that is the subject of the report. "
9. DAC6 compliance
Take into consideration the substantial penalties that may be imposed by Member States for non-reporting, it is important that intermediaries and taxpayers comply with their DAC6 reporting obligations. Penalties are different from one Member State to another, between EUR 5,000 and EUR 5,000,000. This means that for each cross-border agreement, it is necessary to:
- determine whether the agreement is reportable and, if so,
- who is subject to the reporting obligation for this agreement.
In addition, the exact scope of the reporting obligation in the Member States concerned will have to be determined for each agreement, as this may differ substantially from one Member State to another.
Implementation in Romania:
The penalty for non-reporting or late reporting, in Romania, is between 20.000 RON and 100.000 RON.
If you have any questions or need more information, please contact us.