EU proposal requires disclosure to tax authorities of cross-border tax planning schemes by intermediaries, clients

by Julie Martin

Tax advisors, accountants, banks, lawyers, and other intermediaries who design and promote potentially aggressive cross-border tax planning schemes and, in some cases, the clients that receive such advice, would be required to meet new reporting and disclosure obligations under an EU Commission proposal unveiled today.

“We are continuing to ramp up our tax transparency agenda. Today, we are setting our sights on the professionals who promote tax abuse,” said Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, announcing the new proposal.

Under the plan, beginning in 2019, a duty to report would fall on EU intermediaries who supply a cross-border scheme for implementation or on an individual or company implementing a cross-border scheme when it is developed by in-house tax consultants or lawyers.

In cases where the intermediary is not based in the EU or where the intermediary is bound by professional privacy or secrecy rules, the duty to report would fall on the taxpayer receiving the advice.

Member States will automatically exchange this information through a centralized database, allowing them to take measures to block the schemes.

“Tax administrations should have the information they need to thwart aggressive tax planning schemes,” Moscovici said.

Only schemes that bear certain “hallmarks” commonly found in aggressive tax planning arrangements must be reported under the EU plan.

These hallmarks include arrangements that:

  • involve a cross-border payment to a recipient resident in a no-tax country;
  • involve a jurisdiction with inadequate or weakly enforced anti-money laundering legislation;
  • are set up to avoid reporting income as required under EU transparency rules;
  • circumvent EU information exchange requirements for tax rulings;
  • have a direct correlation between the fee charged by the intermediary and what the taxpayer will save in tax avoidance;
  • ensure that the same asset benefits from depreciation rules in more than one country;
  • enable the same income to benefit from tax relief in more than one jurisdiction;
  • do not respect EU or international transfer pricing guidelines.

The hallmarks are described in further detail in an annex to the the proposal.

The proposal will be submitted to the European Parliament for consultation and to the Council for adoption, the Commission said.

Julie Martin

Julie Martin

Founder & Editor at MNE Tax

Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.

Martin has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.

Julie Martin

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