As a result of COVID-19 pandemic, on 24 June 2020, the European Council reached an agreement on an optional delay to the reporting deadlines regarding cross-border arrangements under EU Directive 2018/822 (DAC 6).
About DAC 6
Through the DAC 6, the European Council has adopted new reporting obligations in order to promote the automatic exchange of information in relation to reportable cross-border arrangements. The purpose of DAC 6 is to enhance transparency, reduce uncertainty over beneficial ownership and dissuade intermediaries from implementing harmful tax structures.
In addition, DAC 6 obligates intermediaries or relevant taxpayers to report cross-border arrangements that may be indicative of “potentially aggressive tax planning” to their respective national authorities. Arrangements that must be reported are those that meet one or more of the criteria listed in the annex to the DAC 6.
According to the initial provisions of DAC 6, as of 1 July 2020, arrangements which fall within the scope of DAC 6 must be reported within 30 days of the day after the reportable cross-border arrangement is made available for implementation, or is ready for implementation, or the first step of the implementation has taken place.
Additionally, initial provisions of DAC 6 prescribed that cross-border arrangements for which the first step in the implementation arose between the date of entry into force (25 June 2018) and the date of application of DAC 6 (30 June 2020) must be reported by 31 August 2020.
Extension of reporting deadlines
The European Council adopted an amendment to the DAC 6 due to the implications caused by the COVID-19 pandemic. According to the adopted amendment, the European Council has agreed to an extension of up to six months to the reporting deadlines. The amendment also provides the possibility of further extension for a maximum of three additional months, if the COVID-19 circumstances persist.
The extension of deadlines is optional; therefore, each member state has an option to decide whether to extend the reporting deadlines. Member states are expected to implement the deferred deadlines into their domestic law as soon as possible if they intend to apply said extension.
Croatia is one of the countries that has opted for extension of deadlines.
The new reporting deadline for reportable cross-border arrangements is 28 February 2021 (instead of 31 August 2020) for filing information on the pre-phase of such arrangements where the first step was implemented between 25 June 2018 and 30 June 2020.
Furthermore, with respect to the arrangements targeted by DAC 6 starting from 1 July 2020, where a reportable cross-border arrangement is made available for implementation, or is ready for implementation, or where the first step in its implementation has been made between 1 July 2020 and 31 December 2020, the 30-day reporting deadline starts on 1 January 2021. The above applies both to intermediaries and assistant intermediaries.
Intermediaries from member states which applied the optional extension of deadlines are obliged to submit their first periodic report for marketable arrangements to the respective national authorities before 30 April 2021.
Implications of reporting deadlines
Considering that the extension of reporting deadlines has an optional character, each member state will have to make a decision on whether to apply the extension. Therefore, if a certain member state will not apply extension of reporting deadlines, the initial deadlines will be applied. Consequently, intermediaries or taxpayers potentially will have to honor the initially prescribed deadlines, which may be difficult due to the COVID-19 pandemic implications. On the other hand, member states which will accept extension of reporting deadlines, certainly will be faced with challenging deadlines to implement the deferred deadlines into their domestic law.
For more information on how your Crotian business can remain compliant with EU Directives’ requirements in these challenging times, please contact our Zagreb team.
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