With the first DAC6 reporting deadline approaching, it may be that certain arrangements need to be reported to the Italian tax authorities.
In this post, we discuss what the consequences are for taxpayers if an arrangement is reported and what taxpayers need to do after.
DAC6: some background
DAC6 is a new European directive that requires intermediaries (banks, lawyers, tax advisors, etc) and taxpayers to report to the affected tax authorities cross-border arrangements that could imply a tax saving.
The rules are intended to support transparency, and tackle tax evasion and aggressive tax planning.
Content of the disclosure
Information disclosed to the tax authorities includes:
- the name of the tax payer;
- a description of the transaction;
- the value of the transaction;
- the persons and member states involved; and
- the applicable hallmark (ie index of tax risk) triggering the disclosure.
Implications of the disclosure
Once an arrangement is reported:
- the reporting entity must inform the taxpayer and other intermediaries involved;
- the information is automatically exchanged between member states;
- no admission of tax evasion/avoidance is implied;
- no automatic tax audit is triggered;
- any lack of reaction by the tax authorities does not imply they approve of the arrangement.
What the taxpayer needs to do
Once an arrangement is reported, the taxpayer shall:
- receive from the disclosing intermediary all documents (ie receipt and content of the disclosure, and reference number of the arrangement). If this is not received, disclosing obligations may arise for the taxpayer;
- indicate the reference number in each tax return affected by the reported arrangement;
- store the received documentation (for six years); and
- consider preparing a position paper in case an audit is started.