The EU Commission has recently published a paper with its intention to expand the scope of the EU Tax Intermediaries Directive (DAC6). The proposed changes are aimed to prevent enablers who design, market and / or assist in the creation of arrangements or schemes that lead to tax evasion or aggressive tax planning. The proposals will include clear and objective criteria for defining the forms of aggressive tax planning that are prohibited.
The EU Commission has stated in its paper that while tax evasion is defined as a criminal act under the national laws of Member States, the lack of clear and objective criteria for defining aggressive tax planning, creates a ‘grey zone’, in which some enablers design tax schemes and arrangements that erode the tax base. Tax administrations also lack effective rules and mechanisms that prevent enablers from assisting in tax evasion and aggressive tax planning.
The EU Commission is expected to assess a range of policy options to achieve the objectives based on the principle of proportionality. The range of policy options might include the following:
Option 1: Requirement for all enablers to carry out dedicated due diligence procedures
This option involves a prohibition on enablers from assisting in the creation of arrangements abroad that facilitate tax evasion or aggressive tax planning. In addition, this option foresees the requirement for all enablers to carry out a test to check whether the arrangement or scheme they are facilitating leads to tax evasion or aggressive tax planning. It also requires the enabler to maintain records of these due diligence procedures in all cases. This option could be combined with appropriate measures to address possible non-compliance.
Option 2: Prohibition to facilitate tax evasion and aggressive tax planning combined with due diligence procedures and a requirement for enablers to register in the EU
This option involves a prohibition on enablers from assisting in the creation of arrangements abroad that facilitate tax evasion or aggressive tax planning. The enablers covered by the scope would be required to carry out dedicated due diligence procedures as outlined under Option 1. In addition, enablers that provide advice or services of a tax nature to EU taxpayers or residents would be required to register in an EU Member State. Only registered enablers could provide advice or services of a tax nature to EU taxpayers or residents. In cases of non- compliance, enablers may be removed from the registry.
Option 3: Code of conduct for all enabler
This option involves the requirement for all enablers to follow a code of conduct that obliges enablers to ensure that they do not facilitate tax evasion or aggressive tax planning.
In addition, and regardless of the policy option chosen, a new measure to boost transparency and combat possible tax evasion and aggressive tax planning related to EU investments abroad could be developed. This would require EU taxpayers (both individuals and legal persons) to declare in their annual tax returns any participation above 25% of shares, voting rights, ownership interest, bearer shareholdings or control via other means (the level commonly used in the EU AML legislation) in a non-listed company located outside of the EU.
In connection with these proposed changes the EU Commission has issued a public call for consultation. The consultation period ends on 12th October 2022. The legislative proposal is planned to be published in Q1 2023.
For further information, please contact:
Franco Falzon C.P.A. LL.M (Managing Director)
E: info@ffinternational.com.mt
T: +356 2010 7771 (office)
M: +356 9989 5679 (mobile)
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