DAC6: EU directive against aggressive tax arrangements

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As of 1 July 2020, it is mandatory in the European Union to report certain cross-border arrangements with predefined hallmarks (characteristics) of potential aggressive tax avoidance.

This is a requirement under the EU’s 6th Directive of Administrative Cooperation, commonly called DAC6.

DAC6 obliges intermediaries (such as tax advisors, accountants, law firms and banks) to report certain information on such cross-border arrangements to the local tax authorities. It applies to arrangements involving parties in multiple countries, of which at least one is an EU member state.

The primary intermediary involved, usually the tax advisor, is expected to report the arrangement. However, a bank could also have a reporting obligation as a (secondary) intermediary, e.g. if the primary intermediary does not report the arrangement to the tax authorities.

The local tax authority will in turn share the information with the relevant EU countries. The aim is to provide the countries with real-time information on reportable cross-border arrangements to allow them to take action and also to deter taxpayers from aggressive tax avoidance tactics.

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