2023-12-04 18:21:54
The number of declarations of aggressive cross-border arrangements arising from the DAC 6 regime is modest. Tax advisors are cautious and the deterrent seems to be working.
Is the DAC 6 regime, which requires tax intermediaries to report aggressive cross-border tax planning schemes, akin to a paper tiger? The question needs to be asked. Firstly, the DAC 6 is the subject of multiple appeals And on the other hand, the number of declarations submitted has so far been quite modest.
But what exactly are we talking about? The DAC (“Declaration on Administrative Cooperation”) was established by a European directive in 2011 and was revised for the fifth time on May 25, 2018, hence the name DAC 6. Belgium transposed DAC 6 on December 20 2019. Objective: curb creativity in terms of tax optimization, particularly among multinationals.
Multiple appeals
Recent news shows, however, that the conformity of this reporting obligation for aggressive arrangements with higher standards (Constitution, European law, etc.) is not self-evident. Multiple appeals have come or are in the process of testing the robustness of the system.
In Belgium, the Board of state thus annulled, on May 10, 2023, the royal decree of May 20, 2020, which provides for administrative fines (from 1,250 to 100,000 euros) in the event of violation of the reporting obligation. On July 20, 2023, the constitutional Court annulled, for its part, certain provisions of the Flemish decree transposing the DAC 6 directive, on the grounds that these provisions violated the lawyer’s professional secrecy.
For its part, the Court of Justice of the European Union (CJEU) will soon have to rule on DAC 6, following several preliminary questions sent to it by the Belgian Constitutional Court.
Essential notions called into question
These questions relate in particular to notions essential to the functioning of the DAC 6 reporting obligation, such as those of “cross-border system”, “intermediary” or “main advantage criterion”. “If one or the other of these notions were to fall by the waysidewhich depends on the response of the CJEU, it is the very system of the DAC 6 which would falter on its foundations”, warns Denis-Emmanuel Philippe, lawyer at Bloom and lecturer at ULiège. He has just co-written a book on the issue with Aymeric Nollet, also a lawyer at Bloom and professor at ULiège.
In the meantime, the avalanche of DAC 6 declarations has not taken place. According to the Minister of Finance, there was in Belgium, for the period from June 2018 to December 31, 2021, 684 DAC 6 declarationsof which only 227 by intermediaries (tax advisors, lawyers, bankers, accountants, etc.) and 457 by the taxpayers themselves.
“The intermediaries and taxpayers concerned kept a cool head and refrained from making all-out declarations.”
At European level, information concerning 32,000 devices was transmitted to the European Commission by Member States, again for the period from June 2018 to December 31, 2021. For the period from 1is January 2022 to October 10, 2022, the Commission received data concerning 8,324 devices.
Deterrent effect
Are these modest figures due to case law favorable to professional secrecy? Or is it the result of a certain restraint on the part of intermediaries who hesitate to embark on overly creative arrangements?
“First, we can think that the intermediaries and taxpayers concerned kept a cool head and refrained from making all-out declarations as soon as there was the slightest doubt about the declarable nature or not of an arrangement, which depends on its aggressive nature or not, and on the existence of a main tax advantage”, answers Denis-Emmanuel Philip.
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He also thinks that the intermediaries (and their clients) probably showed a certain restraint. “Why would a tax advisor or tax lawyer venture to offer one of his clients a cross-border tax planning scheme that qualifies as aggressive, if it is to have to immediately declare it to the tax authorities, who will then rush to do everything possible to neutralize it? This is the whole ‘dissuasive’ objective sought by the DAC 6 regime.”
According to Denis-Emmanuel Philippe, the regime will undoubtedly be poorly applied effectively in the sense thatit may not statistically give rise to a large number of declarations. “That said, this is only the very beginning, and we should probably take stock again in two or three years,” he concludes.
“DAC 6 and the reporting of aggressive cross-border tax planning arrangements”, ed. Anthemis and LegiTech, 322 pages, 80 euros
The summary
- Few DAC 6 declarations have been recorded so far.
- Of multiple appeals came to test the robustness of the device.
- The intermediaries and taxpayers concerned have refrained from making all-out declarations.
- The deterrent objective sought by the DAC 6 diet seems to produce its effects.
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