Belgian Mandatory Disclosure Rules DAC6: Mandatory Disclosure Rules

DAC6 refers to the EU Directive 2018/822 of 25 May 2018 which introduced mandatory disclosure rules (DAC6) for intermediaries and relevant taxpayers. These new rules require the disclosure of information on reportable cross-border arrangements to local tax authorities. The information reported is exchanged between EU Member States.

The mandatory disclosure rules (MDR) were transposed into Belgian legislation in December 2019 and took effect on 1 July 2020. However, a transitional retroactive period applied to qualifying cross-border arrangements between 25 June 2018 and 30 June 2020.

Additionally, a 6-month deferral of the reporting obligations applied for the period between 1 July 2020 and 31 December 2020. In principle, reportable cross-border arrangements must be reported within 30 days. 

While the legislation primarily targets potentially aggressive tax planning structures, its scope is quite broad. Accordingly, cross-border tax arrangements that contain one of the defined hallmarks must be reported to the tax authorities. Non-compliance with the reporting obligations can lead to fines of up to EUR 50.000 or EUR 100.000 in case of fraudulent intent.

Below you can find more information on the following:

• The DAC6 / MD rules
• Your compliance & our services
• Recent developments

If you have any questions on the DAC6 legislation and/or our related services, please contact us for more information.

Cross-border arrangement

An arrangement must concern more than one EU Member State or an EU Member State and a third country. Furthermore, certain criteria regarding the participants must be met to qualify the arrangement as a cross-border arrangement. The term ‘arrangement’ is not defined and has a broad meaning. It may include a transaction, agreement, action, scheme, operation, event or undertaking.

Hallmarks

A cross-border arrangement is reportable if it contains at least one of the hallmarks. The hallmarks cover a wide range of arrangements and are classified in five categories:

• Category A - relates to confidentiality imposed on clients, contingent fee arrangements and mass marketed type arrangements.
• Category B - relates to planning for loss utilization after acquisition of a loss-making company, converting income into an item that is exempt or taxed at a lower rate and circular or self-cancelling transactions.
• Category C - relates to cross-border payments where there is a deduction/non-inclusion outcome, a preferential tax treatment for the recipient and certain other transactions that exhibit a mismatch.
• Category D - relates to transactions intended to circumvent transparency-reporting rules or hide beneficial ownership.
• Category E - relates to the use of unilateral safe harbor rules, transfer of hard-to-value intangibles and transfer of assets/functions/risks where a taxpayer’s annual EBIT is reduced by 50% or more.

The “Main Benefit Test”.

The main benefit test applies to category A, B and some of category C transactions. It is a "benefit" test and not a "purpose" test. Accordingly, it can have an impact on commercially driven transactions as well as tax motivated ones.

This test is met if it can be established that the main benefit or one of the main benefits which, having regard to all relevant facts and circumstances, a person may reasonably expect to derive from an arrangement is the obtaining of a tax advantage.

Primary reporting obligation

The primary reporting obligation rests with EU-based intermediaries (based on EU nexus criteria).

An “intermediary” is defined as any person who designs, markets, organizes, makes available for implementation or manages a reportable cross-border arrangement (i.e. primary intermediary). In addition, an intermediary also means any person that knows or could be reasonably expected to know that they have provided, directly or by means of other persons, ‘aid, assistance or advice’ in relation to a reportable cross-border arrangement (i.e. secondary intermediary).

Where an intermediary is unable to report, for reasons of legal professional privilege, it must notify the other intermediaries and/or relevant taxpayer(s) in writing that it is shifting its reporting obligation to the other intermediaries or to the relevant taxpayer(s).

Secondary reporting obligation

The reporting obligation rests with the relevant taxpayer when:

• there is no EU based intermediary involved; or
• the EU intermediary is bound by professional secrecy.

Multiple reporting obligation

Where there is more than one intermediary, all intermediaries must report unless there is written proof that the reporting was done by another intermediary.

Where there is more than one relevant taxpayer and the reporting obligation rests with the relevant taxpayer, the reporting must be done by the relevant taxpayer that:

• agreed to the arrangement with the intermediary;
• manages the implementation of the arrangement.

An exemption applies if there is written proof that the reporting was done by another relevant taxpayer.

General rules

The reporting by primary intermediaries and relevant taxpayers must be done within 30 days, from:

• the day after the reportable cross-border arrangement is made available for implementation to that relevant taxpayer, or
• the day after the reportable cross-border arrangement is ready for implementation by the relevant taxpayer, or
• the day when the first step in the implementation has been made in relation to the relevant taxpayer, whichever occurs first.

The reporting by secondary intermediaries must be done within 30 days beginning on the day after they provided aid, assistance or advice.

Administrative deferral: January and February 2021

An administrative deferral until 28 February 2021 is granted for the arrangements which have to be reported in the months January and February 2021. The sanctions for late reporting will not apply during this period.

Transitional retroactive period: 25 June 2018 – 30 June 2020

Cross-border arrangements where the first step in the implementation was made between 25 June 2018 and 30 June 2020, must be reported no later than 28 February 2021.

Deferral period: 1 July 2020 - 31 December 2020

Cross-border arrangements with a trigger date in the period between 1 July 2020 and 31 December 2020, should have been reported  no later than 30 January 2021, but an administrative deferral was granted until  28 February 2021. The first periodic report for marketable arrangements must be submitted by 30 April 2021.

Non-compliance with a reporting obligation can result in the following penalties:

Incomplete reporting of the required information:

• EUR 1.250 to EUR 12.500
• Intentional: EUR 2.500 to EUR 25.000

Failure to report or delayed reporting of the required information:

• EUR 5.000 to EUR 50.000
• Intentional: EUR 12.500 to EUR 100.000

As a taxpayer, you are affected by the mandatory disclosure rules. Therefore, it may be useful to consider the following questions:

• Have you mapped the type of transactions in your organization that may trigger reporting under MDR in order to adequately manage your tax compliance risks?
  
• Have you set up your internal processes in order to identify potentially reportable cross-border arrangements and to effectively comply with the DAC6 reporting requirements within 30 days, if necessary?
• Do you need assistance in understanding the implications of the DAC6 legislation on your businesses and to ensure compliance with the reporting requirements?

We offer different service levels to help you comply with the DAC6 reporting obligations and can tailor these services to your organizational and business needs. Our services include:

• DAC6 impact assessment: We can help you to assess the compliance risk areas of DAC6 within your organization.
  
• DAC6 internal procedures: We can help you to set up procedures to detect and identify reportable cross-border arrangements within your organization and define a governance framework. We also assist you with implementing these procedures and training your staff.
  
• DAC6 reporting: We can analyze, review and submit reportable cross-border arrangements on your behalf to the relevant tax authorities.
  
• DAC6 Processor: We can provide you with a web-based technology solution: the “DAC6 Processor”. This solution offers you an exclusive and personalized environment where you can independently manage your entire DAC6 compliance process. This tool is designed and developed to manage (potentially) reportable cross-border arrangements and to facilitate compliance in all EU Member States.
  

• 23/04/2021: The Belgian Tax Authorities released a new XML-scheme for filing MDR-DAC6 reports (version 1.3). The new scheme is available on the website of the Belgian Tax Authorities. The current scheme (version 1.2) will be used for filing until 30 June 2021. The new version also implies changes to the validation rules and the user guide. The updated new validation rules and user guide are expected to be published in May. The scheme is relevant for the development of tools which generate XML files for MDR-DAC6 reporting purposes. Accordingly, also the web-application “MDR-DAC 6 XML Tool” on the website of the Belgian Tax Authorities will be modified and the new version will be made available as from 1 July 2021.
• 28/01/2021: The Belgian Tax Authorities announced that, because of the challenges in the communication between those who are required to report and the relevant taxpayers in the start-up phase (due to the COVID-19 pandemic), it will apply an administrative deferral until 28 February 2021 for the arrangements which have to be reported in the months January and February 2021. The sanctions for late reporting will not apply during this period. The announcement of the Belgian Tax Authorities is available here: Mandatory Disclosure Rules (MDR) | FOD Financiën.
• 23/12/2020: Access procedure for DAC6/MDR reporting to the web portal of the Belgian Tax Authorities is available on the website of the Belgian Tax Authorities.
• 23/11/2020: The Belgian Tax Authorities published guidance on the technological requirements of the DAC6/MDR reporting. The published documents include the MDR-DAC6 BE Scheme User Guide and the Validation Rules. The User Guide describes the electronic form “MDR-DAC6 BE Scheme” which must be used by the intermediary or the relevant taxpayer for reporting and explains which information must be included in the form. In order to file a valid reporting, the reporting person must comply with the principles described in the guide and also take into account the Validation Rules to guarantee the quality of the filed information. The MDR-DAC6 BE Scheme User Guide and the Validation Rules are published in English and are available on the website of the Belgian Tax Authorities. You can read our E-Tax Flash on this matter.
• 26/06/2020: The Belgian Tax Authorities published the Circular (FAQ) on the DAC6 Mandatory Disclosure Rules. You can read our E-Tax Flash and download the Circular on the website of the Belgian Tax Authorities.
• 04/06/2020: The Royal Decree specifying the penalties for the failure to comply with the DAC6 obligations was published.
• 03/06/2020: The Belgian Federal Tax Authorities announced a deferral of six months based on their discretionary administrative power, rather than a legislative act. You can read our E-Tax Flash.