On 13 March, the EU Council reached agreement on a proposal aimed at boosting transparency in order to tackle aggressive cross-border tax planning. The proposal would require intermediaries such as tax advisors, accountants and lawyers that design and/or promote tax planning schemes to report schemes that are considered potentially aggressive.
This ties in with member state automatic exchange obligations through a centralised database. Member states will be obliged to exchange information every three months, within one month from the end of the quarter in which the information was filed. It is up to the Member States to lay down rules on effective, proportionate and dissuasive penalties on intermediaries that do not comply with the transparency measures.
The draft directive is aimed at preventing aggressive tax planning by enabling increased scrutiny of the activities of tax intermediaries in establishing ‘hallmarks’ to identify the types of schemes to be reported to the tax authorities. The requirement to report a scheme won’t imply that it is harmful, only that it may be of interest to tax authorities for further scrutiny (broadly reflecting action 12 of the OECD’s 2013 action plan).
In practice this is likely to mean that to the extent that the intermediary is entitled to legal professional privilege (legal secrecy) under national law, the disclosure obligation shifts to any other intermediary in the first instance or to the taxpayer in the absence of any other intermediary. In addition, where there is no intermediary to report, the taxpayer will shoulder the responsibility to disclose such information within thirty days. A certain burden thus rests on taxpayers under the scheme and they must file information about their use of reportable arrangements in each of the years for which the arrangement is used.
Agreement was reached by the Economic and Financial Affairs Council and the Council will adopt the directive without further discussion once the text has been finalised in all official languages. Member States will have until 31 December 2018 to transpose it into national laws and regulations, with all new reporting requirement applying from 1 July 2020. The directive requires unanimity within the Council, after consulting the European Parliament. The Parliament voted its opinion on 1 March 2018.