Brexit-deal: DAC6

15/01/21

What does the Brexit deal mean for the European DAC6 directive?

From 1 January 2021, not only Brexit but also the actual reporting obligation under the European DAC6 directive will apply. In previous publications we have extensively discussed the application of this directive from 25 June 2018. It has been clear for a long time that - despite the implementation of the directive by both the Netherlands and the United Kingdom (UK) - any reports filed in the UK from 1 January 2021 would no longer lead to an exemption for notification in the Netherlands. PwC expert Jan-Willem Thoen discusses important points for attention.

DAC6 directive and United Kingdom

Now that Brexit is actually a fact and no specific agreements have been made in the trade- and cooperation agreement, the European DAC6 directive no longer applies to the UK. The UK has therefore decided to stop implementing the local DAC6 regulations in the UK. This non-application of the European DAC6 directive and local legislation concerns both the reports for transactions that take place and have taken place from 1 July 2020, and the transactions from the period 25 June 2018 to 1 July 2020.

On balance, this means that any reportable transactions that have been reported in the UK or where the intention was to report them in the UK no longer lead to an exemption from the reporting obligation in the Netherlands. In the Netherlands, this will therefore have to be reported within the deadlines set. This is all the more important now that there are significant fines for non-compliance in this context.

In the Netherlands, an exemption from notification can no longer be obtained for transactions whereby the transaction is reported in the UK. Despite the fact that transactions falling under hallmark D still have to be reported in the UK, it seems that no exemption from reporting can be obtained in the Netherlands for such transactions either.

Hallmarks D remain subject to notification

The DAC6 directive sets out several hallmarks: A to E. These hallmarks refer to transactions that must be disclosed in order to alert the tax authorities in the different countries at an early stage to possible aggressive tax planning. These hallmarks all focus on different objectives and outcomes of transactions. Despite the UK's retreating move with regard to the DAC6 obligation, transactions that fall under the D hallmarks of the European DAC6 directive remain subject to reporting in the UK. These are the hallmarks related to undermining Common Reporting Standard (CRS) reporting obligations and rendering beneficial owners (UBOs) unidentifiable.

In the trade- and cooperation agreement between the European Union (EU) and the UK, it has been agreed that the UK will adhere to the minimum standards and rules as agreed within the OECD. From a legal point of view, the rules of the DAC6 directive are not part of the OECD BEPS initiative (and more specifically action 12). The CRS obligations and the automatic exchange of financial data (which are processed in hallmark D) are.

In the Netherlands, an exemption from notification can no longer be obtained for transactions whereby the transaction is reported in the UK. Despite the fact that transactions falling under hallmark D still have to be reported in the UK, it seems that no exemption from reporting can be obtained in the Netherlands for such transactions either.

Brexit desk PwC

PwC's Brexit experts can help you determine the exact requirements you need to meet. They also assist in setting up processes and procedures to ensure that your business meets the requirements for proper handling of the DAC6 directive.