DAC 6: Luxembourg amends the bill implementing the EU mandatory disclosure rules
The EU mandatory disclosure directive (known as DAC 6) targets cross-border arrangements featuring potential indicators of aggressive tax planning. The Luxembourg legislator has now proposed amendments to the original bill to address some concerns expressed by the Council of State.
The features of the original bill (published in August 2019) were highlighted in an earlier tax flash. DAC 6 calls for its implementation into domestic law by EU Member States by the end of 2019. Luxembourg did not yet do so, in part because its Council of State expressed strong doubts as to the compatibility of the originally proposed bill with the professional secrecy of lawyers, accountants and auditors. The Luxembourg legislator has now proposed amendments to the original bill so as to address the concerns expressed by the Council of State.
Shift of reporting obligation where professional secrecy applies
DAC 6 imposes a reporting obligation on intermediaries. Under the directive, the term ‘intermediary’ means any person ‘that designs, markets, organises or makes available for implementation or manages the implementation of a reportable cross-border arrangement’. Examples include lawyers, accountants, banks and consultants. When performing services that are covered by their professional secrecy, however, lawyers would have a generic reporting obligation under the original bill, such that the name of the client would not be revealed. The Council of State considered this generic obligation an unacceptable violation of the professional secrecy. Moreover, it explained that other professionals (such as accountants and auditors) may provide services that fall under professional secrecy as well.
The legislator has amended the bill following the criticism of the Council of State and the bill now no longer provides for a generic reporting obligation in cases covered by professional secrecy. This applies not only to services provided by lawyers, but also to those provided by accountants and auditors. A condition is that they act within the boundaries of their profession and that they are subject to the Luxembourg laws governing these professions. Also, where an intermediary provides a service that involves a reportable arrangement and is covered by professional secrecy, he must notify all other intermediaries that the DAC 6 reporting obligations fall on them. Failing such other intermediaries, he must notify the taxpayer and in that case he must provide the taxpayer with all information that must be reported. Such notification must occur within 10 days after the arrangement is made available for implementation to the taxpayer or when the first implementation step has occurred, whichever comes first. The reporting period for the taxpayer starts at the same time, but is longer (30 days).
The Council of State has been requested to review the changes to the bill with a view to finalising the legislation in the week of 20 March 2020.
How can we help?
The bill is proposed to take effect as per 1 July 2020. As the date of submission of the first DAC 6 reports comes nearer, preparation for DAC 6 is in full swing, also because it will require the reporting of arrangements for the period as of June 2018. Loyens & Loeff can assist you with a full impact assessment, sample and final reporting of arrangements, as well as with advice on how to demonstrate that you are in control of the manner in which DAC 6 impacts your operations.
Willem BonPartner Tax Adviser
Willem Bon, partner, is a member of the Tax Practice Group in our Luxembourg office. He focuses on cross-border tax issues, advising mainly multinational enterprises, investment funds, as well as wealthy individuals and families.T: +352 466 230 214 E: firstname.lastname@example.org
Anne KlethiAssociate Tax adviser / Attorney at law / Avocat à la Cour
Anne Klethi, associate, is a member of the Tax Practice Group in our Luxembourg office. She focuses on international tax matters, notably for private wealth investors, and tax litigation.T: +352 466 230 312 E: email@example.com