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Germany Issues Draft Guidance On DAC6

Tuesday, March 17, 2020

On March 2, 2020, the German Ministry of Finance released a draft discussion document on new rules implementing the sixth European Union Directive on Administrative Cooperation (DAC6), under which intermediaries are obligated to report certain tax planning schemes.

DAC6 (EU Directive 2018/822) requires intermediaries – such as tax advisors, accountants, banks, and lawyers – to report relevant arrangements before they are used. The aim is to provide EU member states with more information on the tax planning schemes that intermediaries design and market, so that they can assess whether the schemes facilitate tax evasion and avoidance. The Commission also hopes that intermediaries will be less likely to design arrangements that will be blocked before they can be implemented.

The responsibility for reporting tax planning schemes will lie predominately with intermediaries. However, in certain cases, the obligation to report such schemes will fall on individuals.

Member states' tax authorities are also required to exchange data on tax planning arrangements on an automatic basis.

Member states were required to transpose the requirements into their domestic laws by December 31, 2019. The DAC 6 rules will enter into force on July 1, 2020, and apply to reportable arrangements dating back to June 25, 2018.

The directive was introduced in Germany under the law of December 21, 2019, on the introduction of a duty to notify cross-border tax regulations. The draft discussion document provides comprehensive information on the new regime, including the scope of the law, and how the requirements apply in practice.

Taxpayers affected by the new rules are invited to comment on the draft document, which the ministry intends to finalize by June 2020.