Statutory Disclosure Reporting – DAC 6: An overview

Issues and Challenges in Statutory Disclosure Reporting DAC 6

The European Union has made it a pre-requisite for applicants to submit data in order to qualify for statutory disclosure of information with the regulatory authorities. However, there are some apprehensions in dealing with this filing and ensuring compliance. The requirements suggest introducing a streamlined process so as to enable an error-free filing of accounts. Let us look at the issues and how to address them through a well defined process.

What is “DAC 6”?

DAC 6 is nothing but a directive adopted by the European Union (recently amended Directive 20188/822) with respect to reportable cross-border arrangements. The first ever filing is going to be on or before 31st August 2020. However, since the filing has to be made retrospectively from 28th June 2018, the action on collecting data and arrangements, which are subject to submission, must be started early, to save time. Arrangements must be submitted on or before 30 days from the date of implementation, commencing from the date of first submission. Information have to be collated and in a reportable format, within a very brief period of time.

It is advisable to engage an intermediary, individual or a business entity who can act as a consultant or an agency, specializing in potentially arranging aggressive tax planning and filing with a cross border implication.

DAC 6 – Salient Features 

There are no exemptions available in the mandatory disclosure by the in-house advisers for being considered as middlemen.

Disclosures have to be made, if there is more than one middleman, with the same cross border arrangement, unless there is sufficient evidence that similar information has been filed by another middleman.

One has to be in total command over all arrangements of the group that could fall within the purview of the parameters of mandatory disclosure scheme, for effective management.

There are severe and stringent penalties that have been introduced, from what are seen from countries, who have already implemented the scheme.

Reporting Formats

Although it is believed that the format would be XML, it is still not clear as to the template that would be used.

Many countries, as part of DAC6 implementation, may use a reporting format they are familiar with for domestic arrangements. Head of tax, therefore, needs to look at the administration of domestic reporting.

Guidelines for Statutory Disclosure and Reporting

  1. Tracking (basically tracking reportable preparations),
  2. Identifying (process that captures likely reportable preparations where local managers report to the head office taxation department),
  3. Central Reviewing (The head office tax department reviews the information reported which provides the basis for decision making on how to handle such preparations),
  4. Decision Making (The taxation department of the head office decides if a preparation is reportable and the entity that would be responsible) and
  5. Filing (The head office function administers the filing with the competent tax authority and also if the preparation should be at all,  filed) are the five important segments that form the process for reporting.

Read more about – Statutory Disclosure Guidance

To get a deeper understanding of the 5 parameters listed above, read our follow-up blog on the same topic!

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