kpmg webinar | are you ready for dac6? · 2020-04-09 · jurisdiction with no cit, or 0% (or almost...

Are you ready for DAC6?

Webinar | Thursday 5 March 2020

2© 2020 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Document Classification: KPMG public

With you today

Janette Wilkinson

KPMG Tax Partner, International and M&A Tax

Nicolas Gurteen

KPMG Director, International and Complex Tax

Alex Roberts

KPMG Senior Manager, International Tax

3


© 2020 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Introduction and agenda

01 What is DAC6? 02 Challenges and

uncertainties

03 Your next steps 04 Any questions?

What is DAC6?

© 2020 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 5


DAC6 in a nutshellSets a minimum standard

for reporting onCross-border arrangements

Reporting of arrangements by intermediaries (or in some case taxpayers)

For all taxes of any kind with the exception of: VAT; customs duties; excise

duties and compulsory social security contributions

Within a set of so-called ‘hallmarks’ (sometimes with a main benefit test)

Some countries are already going beyond the minimum standard (e.g. Poland)

No materiality or SME exemption

6



Penalties – HighlightsMaximum penalty(a) (EUR ‘000)

Penalty between EUR 30,000 and EUR

150,000

Penalty between EUR 150,000 and EUR 1.5 millionPenalty up to EUR 30,000

Penalty more than EUR 1.5 million

0 200 400 600 800 1000 1200

Austria

Belgium

Bulgaria

Croatia

Cyprus

Czech Republic

Denmark

Estonia

Finland

France

Germany

Hungary

Ireland(b)

Italy

Lithuania

Luxembourg

Malta

Netherlands

Portugal

Romania

Slovakia

Slovenia

Spain

Sweden

UK

(b)

Note: (a) Note that the chart does not include penalties applicable in Poland

(b) There is no cap on penalties in Ireland. The chart reflects an annual estimate.

7



Guidance and implementation progressDiscussions with stakeholders

1 Greece

Draft legislation published

1 Cyprus (public consultation completed)

2 Czech Republic

3 Italy

4 Latvia

5 Luxembourg

6 Portugal

7 Spain

8 Sweden

Implementation complete – applicable as

of July 1, 2020(a)

1 Poland (already applicable)

2 Austria

3 Belgium

4 Bulgaria

5 Croatia

6 Denmark

7 Estonia

8 Finland

9 France(b)

10 Germany

11 Hungary

12 Ireland

13 Lithuania(c)

14 Malta

15 Netherlands

16 Romania

17 Slovakia

18 Slovenia

19 UKNote: (a) Unless otherwise indicated

(b) Parliament approval required for full legislative force

(c) Detailed reporting pending

8



Timeline for implementation

25 May 2018

Adoption of the amended

draft directive by ECOFIN

25 June 2018

Entry into force of DAC6(was published on 5 June 2018)

Requirement for retroactive recording of tax arrangements

that are implemented between 25 June 2018 and 1 July 2020

31 December 2019

Implementation of DAC6 in

national law of the member states

1 July 2020

Initial application in the member states

31 August 2020

Subsequent reporting of all

cross-border arrangements for

‘catch up’ period

31 October 2020

First exchange of information between the member states

30 day reporting from the earlier of:

— Arrangement made available for implementation;

— The day it is ready for implementation;

— The day the first step in implementation is made.

9



Two key tasks

Interlinked

approach

1. Look back on

historic transactions

2. Design of go-forward

processes and framework

incorporating both internal

and external transactions

10



Hallmarks

Main benefit test must apply to the hallmarks in red

$General

hallmarks (A)

A.1 The taxpayer undertakes

to comply with a

confidentiality condition

A.2 Contingent fee

A.3 Standardized

documentation

(including standard

forms) is/are used

Specific

hallmarks (B)

B.1 Acquisition of loss

making company,

discontinuation of

main activity and

using losses

B.2 Conversion of

income into a

category taxed at a

lower level/exempt

B.3 Circular transactions

resulting in the

round-tripping of

funds

Cross-border transactions (C)

C.1 Deductible payments to a related party

which is:

(a) not tax resident in any jurisdiction

(b) (i) If the recipient is tax resident in a

jurisdiction with no CIT, or 0% (or almost 0%)

CIT rate (ii) resident in a black-listed country

(EU/OECD)

c) If the payment benefits from a full exemption

from tax

d) If the payment benefits from a preferential tax

regime

C.2 Deduction of the same depreciation on asset

in multiple jurisdictions

C.3 Double tax relief claimed in multiple

jurisdictions

C.4 Transfer of assets with significant

differences in valuation

Automatic exchange of

information and BO (D)

D.1 Circumvention of reporting

obligation on automatic

exchange of financial

account information

D.2 Legal structure lacking

substantive economic

activity where beneficial

owners are unidentifiable

Transfer

pricing (E)

E.1 Unilateral safe

harbor rules

E.2 Transfer of hard-to-

value intangibles

intragroup

E.3 Intragroup transfer

of functions/risks/as

sets resulting in

EBIT decrease

>50% during the

next 3 years

Main benefit test: one of the main benefits which, having regard to all relevant facts and circumstances, a person may reasonably expect to

derive from an arrangement is the obtaining of a tax advantage.

Challenges and uncertainties

12



Interpretations

‘Vanilla’ implementation closely following directive

Approach still to be established

Significantly expanded scope, e.g. including

domestic arrangements, additional taxes

13



IntermediariesPrimary intermediary (“promoter”)

A person who designs, markets, organises or

makes available for implementation, or

manages the implementation of a reportable

cross-border arrangement

Secondary intermediary (“service provider”)

A person who knows or could reasonably

be expected to know that they have

undertaken to provide, directly or by means of

other persons, aid, assistance or advice with

respect to designing, marketing, organising,

making available for implementation or

managing the implementation of a reportable

cross-border arrangement

Not just advisers Duplicate reporting Could be more than one

14



Main benefit test

Commercial

benefits

Tax

benefits

Benefit not purpose

“One of the main”

Objective not subjective

Tax advantage

15



Tax advantages

EU/Non-EU tax advantages

Within policy objectives

Scope of taxes

16



Current status of UK implementation

25 June 2018

Entry into force

31 December 2019

Final domestic law due

Tracking of transactions over ‘catch up period’

Guidance? Schema?

1 July 2020

30 day requirements starts

31 August 2020

Catch up report due

Your next steps

18



Your key tasks before DAC6 goes live

Interlinked

approach

1. Look back on

historic transactions

2. Design of go-forward

processes and framework

incorporating both internal

and external transactions

19



Challenges

Challenges

Managing differences in implementation

Obtaining information from business units on arrangements

Stakeholder engagement and definition of responsibilities

Managing intermediaries and ensuring consistency of disclosure

Managing compliance burden

20



ApproachAssessment of risk areas

1

― Assessment meeting

and identification of

stakeholders

― Impact analysis

workshop to agree

list of transactions

and initial

assessment

2

― Stakeholder

workshop to confirm

impact assessment

and any additional

transactions

― Review of “look

back” transactions

Identification and reporting

3

― Framework design

for ongoing

assessment/

audit process

― Design of

policy/protocol for

intermediaries

― Documentation of

processes designed

to be shared with tax

authorities

4

― Embedding

framework in the

business, including

roles and

responsibilities

― Tracking of

transactions

considered and

actions taken

― Potential use of

technology

Embedding compliance

5

― Guidance and

process instructions

6

― Training materials

for the business

― Annual review of

process and

transactions

disclosed

Relevance analysis

of hallmarksImpact matrix

Implementation

concept and policyDAC6 reporting

framework

DAC6

instructions

Training

and review

Discussion of local implementation and how this can be integrated with the framework

21



KPMG DAC6 ProcessorHighly flexible tool that could form a key part

of a wider DAC6 compliance process

Particularly useful in instances where:

— There is a high volume of transactions; or

— A business has operations in multiple EU

Member States

Ensures there is an audit trail of all transaction

reviews.

Once the final reporting schemas are available,

it can be the core source used for reporting.

22



Are you ready?1. Have you completed an impact assessment?

2. Have you communicated to key business stakeholders?

3. Have you established a compliance process?

4. Have you started to review the look-back period?

Any questions?

24



KPMG contacts

Janette Wilkinson

Partner, International Tax

Corporates

[email protected]

Nicolas Gurteen

Director, International Tax

Corporates

[email protected]

Alex Roberts

Senior Manager, International Tax

Corporates

[email protected]

Peter Grant

Partner, Operational Taxes

Financial Services

[email protected]

Jonathan Downing

Director, International Tax

National Markets

[email protected]

Robert Edwards

Managing Director International Tax

US Corridor

[email protected]

mailto:[email protected]







kpmg.com/uk

Some or all of the services described herein may not be permissible for KPMG audited entities and their affiliates.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or

entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate

as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without

appropriate professional advice after a thorough examination of the particular situation.

© 2020 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated

with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International. | CREATE: CRT123597A

https://home.kpmg.com/uk/en/home.html

https://twitter.com/kpmguk

https://www.linkedin.com/company/1080

https://www.youtube.com/user/KPMGUK

kpmg webinar | are you ready for dac6? · 2020-04-09 · jurisdiction with no cit, or 0% (or almost...

Documents