As you probably know, the law of 25 March 2020 implementing Council Directive 2018/822/EU of 25 May 2018 (the “DAC 6 Law”), in force since 1 July 2020, requires certain intermediaries and relevant taxpayers to report cross-border tax arrangements implemented on or after 25 June 2018 to the Luxembourg tax authorities (the “LTA”).

An arrangement becomes reportable if:

  • it is considered a cross-border arrangement, and
  • it contains indications of a potential risk of tax avoidance, also called “hallmarks”. A list of hallmarks is provided in DAC 6 Law. Some hallmarks trigger a reporting obligation only if the arrangement meets what is known as the “main benefit test”.

Starting 1 January 2021*, reporting obligations to the LTA apply both for reportable cross-border arrangements for which the first step of implementation was taken during the period 25 June 2018 – 30 June 2020 (reporting required by 28 February 2021), and for reportable cross-border arrangement implemented on or after 1 July 2020 (from 1 January 2021, reporting required within 30 days).

The DAC 6 Law imposes a fine of up to EUR 250,000 per arrangement in the event of non-compliance with these reporting obligations (i.e. late or incomplete reporting, or failure to report).

How can Arendt help you?

As an IFM, you could be an intermediary, a relevant taxpayer, or both. Should you report all of the arrangements you participate in? What information should you give the LTA? We can help answer these questions by assisting you with:

  •  a detailed analysis of how the DAC 6 Law applies to you as an IFM,
  • drafting your DAC 6 policy to allow you to demonstrate that the arrangements you organise and implement as an IFM are dealt with appropriately for the purposes of DAC 6,
  • preparing and generating DAC 6 reports in accordance with LTA requirements.

Please do not hesitate to contact our experts at DAC6@arendt.com.

* Due to the COVID-19 pandemic, an agreement has been reached at EU level to extend the deadlines for the reporting of information provided for in Directive 2018/822/EU by 6 months (i.e. reporting obligations will begin as from 1 January 2021). The Luxembourg government’s bill of law 7625 is expected to be voted through in the next few days to implement these deadline extensions.

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