The latest amendment to the EU’s Directive on Administrative Cooperation (“DAC6”) requires EU intermediaries (and in certain cases relevant EU taxpayers) to report on cross-border tax arrangements that are potentially aggressive or abusive, so-called “reportable cross-border arrangements” (RCBAs).

After the go-live on 1 July 2020, DAC6 will require reporting within 30 days after the start date of a new RCBA. In addition, DAC6 includes a retroactive element requiring reporting of all arrangements going back to 25 June 2018 by 31 August 2020.

Even though member states are still transposing the Directive into local law, affected institutions should kick off their implementation efforts now. Delaying implementation bears the risk of not being ready in time for the first reporting and will additionally increase the review backlog for RCBAs subject to the retroactive reporting obligation.

DAC6 does not piggyback on existing regulations when defining the term “intermediary”. Instead, reporting obligations are imposed on literally everyone who is involved in the offering of RCBAs and has an EU nexus. Based on the type of arrangements that DAC6 covers, most of the financial services industry will be in scope of DAC6 as intermediaries. Even financial institutions resident in Switzerland should care about DAC6, as outlined in our previous blog post.

DAC6 also requires reporting by the beneficiaries of an RCBA (e.g. recipients of relevant tax advice or other tax-related offerings) in case no EU intermediary is involved but they themselves have a relevant EU nexus. This includes situations where the intermediary is outside the EU or where the arrangement is developed in-house.

In an upcoming blog series, Deloitte will provide additional insights into how DAC6 affects various industries, including examples of typical RCBAs for:

• Banking
• Trust/ fiduciary
• Insurance
• Asset Management
• Non-FSI

What actions can you take now?

Many jurisdictions are still drafting legislation to implement DAC6, and many things are unclear. First insights from the legislative process in the various member states also shows that there will be local deviations (e.g. expansion to domestic arrangements). However, experience from prior tax regulatory projects indicates that getting ready for reporting within 1 year is very ambitious (e.g. due to the time it takes to mobilise an organisation or IT development cycles). There are a number of tasks that can already be executed today despite the regulatory uncertainty:

• Performing an impact assessment to determine whether and how one is affected, which will ensure focus on key aspects, identifying relevant areas of uncertainties and deciding on the appropriate implementation measures
• Mobilising your organisation by raising awareness, forming implementation teams, assigning responsibilities and building up internal knowledge through training
• Drafting and updating policies and reviewing the overall governance framework to ensure organisational readiness
• Drafting generic business requirements documents and identifying what IT changes to expect based thereon

All these tasks do not require detailed local guidance but can be tackled using the Directive as a baseline document as it represents the lowest common denominator, i.e. the minimal implementation standard.

In the end, the tasks that can be started may vary from institution to institution. However, it is clear that any preparatory work done now will leave more time for the actual implementation and fine-tuning in 2020.

By: Robin King, Senior Manager and Marnix Kippersluis, Consultant, Financial Services Tax 

If you would like to discuss more on this topic, please do reach out to one of the key contacts below:

Key contacts

Brandi Caruso - Partner, Financial Services Tax 

Brandi heads the Tax Transparency offering within the Financial Services Tax practice across Switzerland, responsible for services related to QI, 871(m), FATCA, CRS, and DAC6. She is a technical advisor and a subject matter expert to a number of Swiss-based trust companies and banks and leads the Deloitte Trust Forum. She has more than 15 years of experience with Deloitte in the US, UK, and in Switzerland.

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Karim Schubiger – Director, Financial Services Tax 

Karim leads the Tax Transparency team in the Suisse Romande and Ticino markets within the Financial Services Tax & Legal practice, responsible for services related to QI, FATCA, CRS, 871(m) and DAC6. He is a technical advisor and subject matter expert to financial institutions in the banking, trust, and insurance sectors. Prior to joining Deloitte, Karim worked for eight years in support teams of Swiss banks, in particular in areas such as operations, project and change management as well as operational taxes.

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Michael Grebe - Director, Financial Services Tax

Michael is a Director in the Financial Services Tax practice. He advises banks, trust companies, and insurers in relation to the interpretation and implementation of the global transparency related regimes. He has over ten years of experience in the financial industry covering a broad spectrum ranging from Process- over Project- to Product- Management. Prior to joining Deloitte, he led the FATCA and CRS implementation project for a global financial institution.

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Robin King - Senior Manager, Financial Services Tax

Robin is a Senior Manager working in Financial Services Tax. He is currently advising leading Swiss universal and private banks, acting as subject matter expert in the area of QI, FATCA , CRS and DAC6. Robin is the author of several articles on CRS. Prior to joining Deloitte, he worked as a cross-border tax compliance expert at a Swiss private bank.

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Marnix Kippersluis - Senior Consultant, Financial Services Tax

Marnix is a Senior Consultant in the Financial Services Industry Tax team in Zürich, where he advises international financial institutions on the implementation and interpretation of FATCA and CRS and DAC6 regulations. Marnix holds a Master of Law degree from Utrecht University, the Netherlands.

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