MNEs will have to develop a policy
In 2018, the EU adopted new minimum rules for the disclosure of potentially aggressive cross-border tax planning arrangements. EU Member States have to implement these rules in their domestic legislation on 31 December 2019 at the latest. The new rules will however also be applicable to hallmarked transactions of which the implementation started after 25 June 2018 and will therefore have a retroactive effect.
Intermediaries (e.g. tax advisors) that are involved in the set-up of certain tax arrangements are obliged to report these transactions to the tax authorities. If no intermediary is involved – or if no EU based intermediary is involved – the taxpayer itself will have to report the tax arrangement to the tax authorities.
For taxpayers and their advisors, the new rules have important consequences.
An affected transaction has to be reported within 30 days following the first step of implementation. If an affected transaction is not reported timely, this may result in a severe penalty. For example, in the Dutch draft legislation, a maximum fine of EUR 830,000 is proposed. In addition, non-compliance may result in reputational damage for the taxpayer and his advisor.
Although the disclosure requirements mainly affect transactions of which the main benefit is a tax advantage, the requirements also affect certain transactions that have sound business reasons. Companies should therefore be aware that some transactions will have to be reported in all cases. This is for example the case if functions are transferred within a group and such transfer results in a decrease of the EBIT of the transferring company of at least 50%. Even if there are sound business reasons for such restructuring, the transaction still has to be reported under the disclosure rules.
For advisors, verification of mandatory disclosure requirements will become an essential part of their advisory services. An advisor who is able to provide his client with good and timely advice in this respect will certainly add value for the client.
For MNEs, it is important to be aware of the new disclosure rules and make clear arrangements with their advisors. It is important to have clarity on who will report, which transactions will be reported, in which countries and when.
Also, MNEs will need to have a clear view on when their advisor will report and in which cases the company itself will have to report.
These new rules are therefore not just an administrative hurdle for intermediaries, but will be a key element in advice on tax and transfer pricing arrangements.
If you would like to know more about what the new disclosure rules mean for your company or would like to receive more background information, please contact Stefan Ubachs at +31 88 221 58 00 or your trusted Quantera Global advisor.