European Commission proposes recast of DAC directives
At the end of June, the European Commission presented a proposal to recast the DAC directives. Alongside the Omnibus package, this is another legislative proposal aiming to reduce the administrative burden, make the rules clearer, and eliminate duplication of reporting obligations under the Directive on Administrative Cooperation in the field of taxation.
The Omnibus package, which focuses on amendments to directives in the area of direct taxation, is covered in detail here.
The DAC directives set the rules of administrative cooperation in the area of direct taxation between tax administrations at EU level, imposing a range of reporting obligations on taxpayers and other persons. The recent legislative proposal aims to consolidate all existing DAC directives from DAC 1 to DAC 9 into a single legislative act. In addition, it contains a number of substantive changes that remove overlapping reporting obligations and simplify the existing rules.
Consolidation of reporting obligations (DAC 4 and DAC 9)
The proposal consolidates the reporting obligations under DAC 4 (Country-by-Country Reporting, “CbCR”) and DAC 9 (Pillar Two). Multinational groups that fall within the scope of both directives currently have to comply with two separate reporting obligations at the level of individual constituent entities. Under the new rules, it should be possible to file one combined notification for the entire group in a single jurisdiction, using a standardised form covering the reporting obligations under both directives.
The deadline for filing the combined notification should correspond to the current deadline for filing the CbCR notification, i.e. no later than the last day of the relevant reporting period. For the notification under Pillar Two, this would significantly shorten the deadline (from the original 18 or 15 months after the end of the period to the last day of that period). The proposal also indicates that the notification should be filed annually, rather than only upon the first-time notification or when the reported facts change, as is currently the case for CbCR.
Changes to reporting obligations for cross-border arrangements (DAC 6)
The most significant proposed change is that corporate groups subject to Pillar Two rules would be excluded from the reporting obligations under DAC 6. This is because the introduction of the global minimum tax rules, which ensure a 15% taxation, significantly reduces the tax planning risks that DAC 6 primarily targets. However, the exemption would not apply to groups under the side-by-side regime or to constituent entities that are not subject to a qualified top-up tax.
The proposal also amends certain hallmarks of cross-border arrangements:
- Category A (generic hallmarks) would be abolished entirely due to its limited added value.
- Subcategory C1 (profit shifting hallmarks) would refer to the EU list of non-cooperative jurisdictions.
- Subcategory D2 (obscuring beneficial ownership hallmark) should be further clarified to increase legal certainty and ensure consistent application.
- The Main Benefit Test should also be made more precise. The aim is, again, to increase legal certainty and limit reporting of arrangements driven solely by a cautious or conservative interpretation of the rules.
The proposal also extends the filing deadline from the current 30 days to 90 days from the day on which the first step towards implementing the arrangement was taken. At the same time, it proposes to remove the other trigger events for the start of the reporting deadline (i.e. when the arrangement is made available for implementation or when it is ready for implementation.)
The changes will also be made to the rules for marketable cross-border arrangements, and it is also proposed to narrow the exemptions from the reporting obligation on the grounds of secrecy: under the new rules, the exemption would apply only to the legal professions.
Changes to reporting obligations for digital platform operators (DAC 7)
The proposal amends the reporting rules for digital platform operators. The threshold for mandatory reporting is to increase from EUR 2,000 to EUR 3,000, and the supplementary criterion of the number of transactions carried out (currently 30 transactions) would be abolished.
Smaller platform operators whose total annual consideration for intermediation/facilitation does not exceed EUR 50,000 may also be excluded from the reporting obligation. To benefit from this exemption, the operator will have to notify the tax administrator of this fact.
Other changes
The scope of categories of income and assets subject to automatic exchange of information is being amended: the life insurance products category will be removed, while the exchange of information on the beneficial ownership of real estate will be added.
At the same time, it is proposed to introduce a digital tool that will make it possible to verify a tax identification number for direct tax purposes, i.e. a TIN.
The proposal for all changes, which must be approved by the European Parliament and the Council of the EU, is available on the European Commission’s website. The individual changes are proposed to become effective gradually between 2028 and 2030.