EU mandatory disclosure rules: impact on Swiss businesses
On 25 May 2018, the Council of the European Union (EU) adopted a directive (Directive) introducing mandatory disclosure rules for certain corporate transactions with a cross-border dimension (MDR). The reporting obligation either falls on the taxpayer or any EU-based intermediaries such as lawyers, accountants and tax advisers. EU Member States’ tax authorities will exchange the information received under MDR automatically within the EU.
The rules of the Directive apply as of 25 June 2018. EU-based intermediaries or taxpayers will therefore have to collect information on all reportable cross-border transactions for the next two years as these will have to be reported in August 2020.
The MDR will also have an impact on Swiss businesses as certain corporate transactions with EU-based taxpayers will be in scope of the rules – meaning that the transaction will have to be disclosed to the tax authorities of the relevant EU member state. This can notably impact any Swiss entity which benefits from a preferential tax regime (such as mixed company regime) or any intra-group transaction which relies on unilateral safe harbor rules (such as the Swiss safe harbor interest rates).
Who has the obligation to report?
The reporting obligation applies to intermediaries (legal entity or natural person) with a link to the EU. The definition of intermediary is very broad and may therefore also include professionals providing trust services and family offices. If no EU-based intermediary is involved, the reporting obligation lies with the taxpayer.
Accordingly, also corporate transactions which are only led by an in-house tax department will be reportable if such transaction is in scope of the MDR. Although the Directive does not expressly state that only EU-based taxpayers will be required to report transactions, Swiss business will likely face the issue of Swiss blocking statutes if information should be directly disclosed to foreign tax authorities – an issue Swiss groups already faced when implementing CbCR and Master File obligations.
In practice, Swiss advisers are expected to have no reporting obligation meaning that the taxpayer has to comply with such obligations directly (if no other, EU-based intermediary is involved). For illustration see the chart below.
It is all about reportable corporate transactions
The Directive defines reportable cross-border transactions as arrangements concerning either more than one EU member state or an EU member state and a third country which falls within at least one of the hallmarks outlined below. Some of the hallmarks only apply if the main benefit test is met, meaning that the main benefit or one of the main benefits from the transaction is obtaining a tax advantage (highlighted below). For instance, tax-deductible payments made by an EU company to a Swiss affiliate can be in scope if the Swiss affiliate benefits from a preferential tax regime.
As the Directive enters into force on 25 June 2018, EU-based intermediaries and taxpayers should collect all required information on relevant transactions and implement an adequate process to tackle the workload ahead.
Loyens & Loeff provides tailor-made multi-jurisdictional solutions to clients both in Switzerland and the European market. Please do not hesitate to contact our specialists in your jurisdiction.
Beat BaumgartnerPartner Attorney at law, Swiss certified tax expert
Beat Baumgartner, attorney at law and Swiss certified tax expert, is a partner in our Zurich office. He focuses on Swiss and international taxation, M&A, financing and capital market transactions.T: +41 43 434 67 10 M: +41 79 930 63 52 E: firstname.lastname@example.org
Fabian SutterAssociate Attorney at law, Swiss certified tax expert
Fabian Sutter, attorney at law and Swiss certified tax expert, is an associate in our Zurich office. He focusses on Swiss and international taxation, in particular corporate reorganizations and restructurings, M&A, financing and capital market transactions, transfer pricing, private equity, real estate transactions as well as tax litigation.T: +41 43 434 67 14 M: +41 79 398 76 39 E: email@example.com
Anaïs NäscherAssociate Attorney at law, Tax adviser
Anaïs Naescher, attorney at law and tax adviser, is an associate of our Zurich office. She focuses on Swiss and international taxation, in particular for (ultra) high net worth individuals, executives and entrepreneurs, and family offices.T: +41 43 434 67 20 M: +41 79 596 26 27 E: firstname.lastname@example.org