Search
deen

Tax Advice

Specifications of the federal ministry of finance regarding DAC 6 reporting obligations

Since 1 July 2020, cer­tain cross-bor­der tax ar­ran­ge­ments must be re­por­ted to the tax aut­ho­ri­ties (DAC6 re­por­ting ob­li­ga­ti­ons). Af­ter publis­hing the draft of a let­ter of in­ter­pre­ta­tion in July 2020, Ger­many’s Fe­deral Mi­nis­try of Fi­nance (BMF) un­vei­led the fi­nal ver­sion on 29 March 2021. In the over 70-page do­cu­ment, the BMF pro­vi­des its in­ter­pre­ta­tion of the many un­de­fi­ned le­gal con­cepts in the sta­tutory pro­vi­si­ons on DAC6 and whi­te­lists stan­dard ca­ses that would ge­ne­rally not lead to a re­por­ting ob­li­ga­tion.

While the BMF let­ter of in­ter­pre­ta­tion should make it ea­sier to com­ply with the re­por­ting ob­li­ga­ti­ons in prac­tice, nu­me­rous le­gal terms are still very much open to in­ter­pre­ta­tion. Each spe­ci­fic case must also be ana­ly­sed to de­ter­mine whe­ther or not the re­le­vant si­tua­tion has to be re­por­ted.

© unsplash

Legal Framework

Cross-bor­der tax ar­ran­ge­ments which meet spe­ci­fied cha­rac­te­ristics (hall­marks) are re­qui­red to be re­por­ted to the tax aut­ho­ri­ties wi­thin 30 days. Yet, the re­por­ting ob­li­ga­ti­ons are by no me­ans li­mited to tax avo­idance stra­te­gies. Si­tua­ti­ons that are cle­arly wi­thin the li­mits set by the le­gis­la­tion and do not pre­sent any in­di­ca­tion of abuse also have to be re­cor­ded.

The si­tua­tion has to be re­por­ted to the Fe­deral Cen­tral Tax Of­fice (Bun­des­zen­tral­amt für Steu­ern, BZSt) by the in­ter­me­di­ary (no­ta­bly a tax ad­vi­sor, la­wyer, au­di­tor). In some ca­ses the full or part of the re­por­ting ob­li­ga­tion lies with the re­le­vant tax­payer (“user” of the ar­ran­ge­ment).

The large num­ber of un­de­fi­ned le­gal terms in the sta­tutory pro­vi­si­ons ma­kes it more dif­fi­cult to de­ter­mine whe­ther a re­por­ting ob­li­ga­tion exists in the spe­ci­fic case. To ex­plain these terms and cla­rify ques­ti­ons of le­gal dif­fe­ren­tia­tion with re­le­vance for ac­tual si­tua­ti­ons, the Fe­deral Mi­nis­try of Fi­nance publis­hed a com­pre­hen­sive let­ter of in­ter­pre­ta­tion on 29 March 2021.

Insights from the BMF letter of interpretation

In ad­di­tion to pro­vi­ding de­tai­led ex­plana­ti­ons on who is spe­ci­fi­cally re­qui­red to ful­fil the re­por­ting ob­li­ga­ti­ons, the BMF spe­ci­fi­cally ad­dres­ses the dif­fe­rent hall­marks. Cer­tain hall­marks only lead to a re­por­ting ob­li­ga­tion if one of the main be­ne­fits ex­pec­ted to be de­ri­ved from the ar­ran­ge­ment is the ob­tai­ning of a tax ad­van­tage (main be­ne­fit test).

As one of the to­pics the BMF spe­ci­fies in which ca­ses – af­ter the main be­ne­fit test has been per­for­med – a tax ar­ran­ge­ment is re­por­ta­ble un­der the hall­marks of a “stan­dar­di­sed ar­ran­ge­ment”, “the con­ver­sion of in­come”, “cir­cu­lar tran­sac­tions”, or “pre­fe­ren­tial or (vir­tually) tax-free in­tra-group pay­ments”.

Ir­re­spec­tive of the main be­ne­fit test, in­tra-group cross-bor­der pay­ments that are de­duc­tible as busi­ness ex­pen­ses for the payer, for ex­am­ple, lead to a re­por­ting re­qui­re­ment if the payee is a re­si­dent in a state on the EU- or OECD-black­list of un­coope­ra­tive sta­tes. This list of sta­tes is avail­able on the web­site of the Fe­deral Cen­tral Tax Of­fice (www.bzst.de), to which the BMF ma­kes re­fe­rence in its let­ter of in­ter­pre­ta­tion.

The BMF also ad­ded a whi­te­list to its ex­plana­ti­ons set­ting out the stan­dard ca­ses that do not tend to lead to a re­por­ting ob­li­ga­tion in con­nec­tion with the hall­marks that are sub­ject to the main be­ne­fit test. For ex­am­ple, the ex­er­cise of tax op­ti­ons or the use of tax ex­emp­ti­ons or al­lo­wan­ces will in ge­ne­ral not con­sti­tute a tax ad­van­tage qua­li­fy­ing as a main be­ne­fit.

What needs to be done?

With the pu­bli­ca­tion of the fi­nal ver­sion of the BMF’s let­ter of in­ter­pre­ta­tion the of­fi­cial le­gal opi­nion of the tax aut­ho­ri­ties on nu­me­rous is­sues re­la­ting to DAC6 is now avail­able. This pro­vi­des grea­ter cla­rity as to which ca­ses re­quire a com­pre­hen­sive ana­ly­sis to en­sure com­pli­ance with the DAC6 re­por­ting ob­li­ga­ti­ons. Howe­ver, the BMF’s ex­plana­ti­ons do not pro­vide in­struc­tions on how to pro­ceed in each in­di­vi­dual si­tua­tion. In view of the vast num­ber of pos­si­ble tax sce­na­rios and op­ti­mi­sa­tion pos­si­bi­li­ties, the BMF let­ter of in­ter­pre­ta­tion does not pro­vide a con­clu­sive list or gui­de­lines for ex­ami­ning each spe­ci­fic case.

This gi­ves rise to the fol­lo­wing con­side­ra­ti­ons for your com­pany:

Is your com­pany re­qui­red to ful­fill re­por­ting ob­li­ga­ti­ons?

To what ex­tent could your com­pany have re­por­ta­ble tax ar­ran­ge­ments? Con­trary to what the name sug­gests, or­di­nary group si­tua­ti­ons may also fall un­der the re­por­ting ob­li­ga­tion.

In in­di­vi­dual work­shops we will cla­rify with you whe­ther your com­pany is af­fec­ted. We will jointly iden­tify (po­ten­ti­ally) re­por­ta­ble si­tua­ti­ons (im­pact ana­ly­sis) ba­sed on spe­ci­fic real-life ca­ses.
 
Is ef­fi­ci­ent Ful­fill­ment of the re­por­ting ob­li­ga­ti­ons en­su­red?

Ef­fec­tive com­pli­ance with the re­por­ting ob­li­ga­ti­ons re­qui­res clear pro­ces­ses that in­cor­po­rate all di­vi­si­ons of the com­pany re­la­ted to po­ten­tial DAC6 re­por­ting ob­li­ga­ti­ons. Fol­lo­wing our joint work­shop or ba­sed on an ana­ly­sis of your com­pany’s struc­ture and pro­ces­ses, we will de­ve­lop DAC6 pro­ces­ses for your com­pany. To­ge­ther we can sum­ma­rise our fin­dings in the form of cu­st­omi­zed DAC6 gui­de­lines which you can make avail­able to all re­le­vant par­ties in your com­pany. The DAC6 gui­de­lines will re­flect the ty­pi­cal si­tua­ti­ons in the com­pany with the in­vol­ve­ment of the re­spon­si­ble per­sons or de­part­ments as well as the re­sul­ting steps for ac­tion and thus in­crease pro­cess ef­fi­ci­ency.

Are your exis­ting pro­ces­ses up to date?

The BMF’s in­ter­pre­ta­tion of 29 March 2021 pro­vi­des more cla­rity re­gar­ding a num­ber of ca­ses in which re­por­ting ob­li­ga­ti­ons may exist. Ta­king these in­sights into ac­count, you should con­sider whe­ther your exis­ting DAC6 pro­ces­ses can be ad­ap­ted or im­pro­ved. In a fol­low-up work­shop we will work to­ge­ther with you to de­ter­mine to what ex­tent you should mo­dify your pro­ces­ses.

How will the fin­dings of the ana­ly­sis be re­cor­ded?
 
The fin­dings of the ana­ly­sis of past ar­ran­ge­ments con­tain im­port­ant in­for­ma­tion for hand­ling com­pa­ra­ble fu­ture si­tua­ti­ons and thus of­fer con­side­ra­ble po­ten­tial for op­ti­mi­sa­tion. To har­ness this po­ten­tial, it is ad­visa­ble to have well-struc­tu­red do­cu­men­ta­tion. Ef­fi­ci­ent pro­ces­ses can of­ten be de­ve­lo­ped from iden­ti­fied re­por­ta­ble ar­ran­ge­ments so that com­pa­ra­ble fu­ture con­stel­la­ti­ons can be iden­ti­fied in good time and re­por­ted in a ti­mely man­ner. It is also hel­pful to do­cu­ment si­tua­ti­ons for which a DAC6 re­port was re­jec­ted for good re­ason fol­lo­wing an ap­pro­priate as­sess­ment of the in­di­vi­dual case. This ap­plies in par­ti­cu­lar to ca­ses in which a re­por­ting ob­li­ga­tion is de­nied due to the main be­ne­fit test not being met.
 
Sub­mis­sion of re­ports?

Dif­fe­rent tech­ni­cal pro­ce­du­res are avail­able for re­por­ting such ar­ran­ge­ments. We are able to ad­vise you on the ad­van­ta­ges and di­sad­van­ta­ges of the in­di­vi­dual pro­ce­du­res. In ad­di­tion, we can also sub­mit the re­ports on your be­half if you are unable to or do not wish to do so your­self.
 
Re­por­ting ob­li­ga­ti­ons ab­road?

As the re­por­ting ob­li­ga­ti­ons are ba­sed on EU law, cor­re­spon­ding re­gu­la­ti­ons are in place in the other EU mem­ber sta­tes. We cla­rify whe­ther the re­por­ting ob­li­ga­tion ori­gi­na­tes in Ger­many or in other EU coun­tries. Th­rough our Ne­xia net­work, we re­ceive first-hand in­for­ma­tion on the spe­ci­fic form the DAC6 re­por­ting ob­li­ga­ti­ons take in the re­le­vant EU coun­try. In coope­ra­tion with our Ne­xia part­ners, we are also happy to sup­port you in the sub­mis­sion of any DAC6 re­ports ab­road as re­qui­red.
 
Com­pli­ance en­su­red?

The re­ports sub­mit­ted on your be­half in Ger­many and ab­road ful­fil the cor­re­spon­ding re­por­ting ob­li­ga­ti­ons. Fur­ther­more, we will as­sist you in en­su­ring that the re­qui­red in­for­ma­tion is in­clu­ded in your tax re­turns from 2019 so as to ful­fil the sta­tutory ob­li­ga­ti­ons and avoid ad­mi­nis­tra­tive of­fen­ces. To en­sure this in the fu­ture as well, we sup­port you to de­fine pro­ces­ses for your com­pany and in­te­grate them into your exis­ting com­pli­ance ma­nage­ment sys­tem as re­qui­red.
 
Ques­ti­ons?

Please con­tact your de­si­gna­ted ad­vi­sor at Eb­ner Stolz, who is able to con­sult our team of ex­perts at any time on is­sues re­la­ting to the re­por­ting ob­li­ga­ti­ons for cross-bor­der tax ar­ran­ge­ments.

20.04.2021 back to top

Related Topics

Glo­bal Mi­ni­mum Tax: A chal­lenge for large groups

From fi­nan­cial year 2024 on­wards, large groups must ex­amine the ex­tent to which an ad­di­tio­nal tax (so-cal­led top-up tax) is payable due to the re­qui­re­ments of the glo­bal mi­ni­mum tax. Even if all group en­ti­ties are ba­sed in coun­tries with a no­mi­nal cor­po­rate tax rate well above the mi­ni­mum tax rate of 15 %, the glo­bal mi­ni­mum tax may ne­vert­he­less lead to an ad­di­tio­nal tax or at least ad­mi­nis­tra­tive bur­den. Howe­ver, tem­porary safe har­bour ru­les may re­duce the ad­mi­nis­tra­tive bur­den in many ca­ses.  ...read more

Bun­des­tag ad­opts Mi­ni­mum Tax Di­rec­tive Im­ple­men­ta­tion Act

On 10 No­vem­ber 2023, the Ger­man na­tio­nal par­lia­ment pas­sed the Act on the Im­ple­men­ta­tion of Coun­cil Di­rec­tive (EU) 2022/2523 to en­sure glo­bal mi­ni­mum ta­xa­tion and other ac­com­pany­ing mea­su­res (also known as the Mi­ni­mum Tax Di­rec­tive Im­ple­men­ta­tion Act) in the ver­sion re­com­men­ded by its Fi­nance Com­mit­tee on 8 No­vem­ber 2023.  ...read more