Finnish Ministry of Finance published follow-up report on experiences of DAC6 reporting in Finland
Both the intermediaries and Finnish businesses considered that obligations related to DAC6 legislation had caused additional work and costs.
Obligations related to DAC6 legislation had caused additional work and costs.
The Finnish Ministry of Finance published on August 19, 2022, a follow-up report on experiences gained from reporting of cross-border arrangements under DAC6 provisions in Finland. The report is based on views presented by different stakeholders such as representatives of Finnish intermediaries, Finnish businesses and the Finnish Tax Administration (FTA). Preparation of such report was based on the DAC6 legislative process – then the Parliament expected the impact of the provisions to be evaluated after they had been applied for some time.
We have summarized the key findings of the follow-up report: the characteristics of the reported arrangements in Finland, the compliance costs related to DAC6 reporting and views about extending the reporting obligation also to domestic arrangements. We wanted to share our observations on the topic in order to keep you informed on the progress of DAC6 reporting requirements. When the FTA updates their DAC6 guidance going forward, it may be good time to re-visit the reporting processes and internal guidance of groups operating in Finland.
Characteristics of reported arrangements in Finland
The FTA disclosed that between July 1, 2020 and April 4, 2022, it had received a total of 214 reports for cross-border arrangements reported in Finland. The number of reportable arrangements was lower than FTA had expected. The reporting was also limited to only certain hallmarks and some hallmarks had not been the basis of any reports. More than 80 percent of the arrangements were reported based on the hallmark of differences in tax treatment or the hallmarks concerning transfer pricing. The FTA has not received any reports based on hallmarks concerning condition of confidentiality, a fee linked to a tax advantage, or the use of losses.
The FTA reported that so far it has not carried out any tax assessments which would have been based solely on a DAC6 report. They are however utilizing the reports in their risk evaluation work along with other information they have. The FTA also pointed out that the reports bring matters to the FTA’s knowledge early even though in some situations a report may be filed even though no arrangement will actually be ever implemented. The FTA has not observed any legislative loopholes or ambiguities in the Finnish tax laws as a result of the reports they have received. They also stated that most of the reports filed concerned normal operational business activities and transactions.
Compliance costs related to DAC6 reporting
Both the intermediaries and Finnish businesses considered that obligations related to DAC6 legislation had caused additional work and costs – even considerable amounts. Businesses stated that DAC6 related obligations were complex and getting familiar with and fulfilling their obligations legislation requires extensive and expensive processes and tools. Further, even if there are only few or no reportable arrangements, the required measures must be taken to determine whether the arrangement is reportable. Businesses had also been required to seek outside assistance to determine whether something was reportable or not which has caused additional costs.
Domestic arrangements under the scope of reporting
The stakeholders were also asked for their views about extending the reporting obligation also to domestic arrangements. This was however estimated by most respondents not to bring any significant number of new arrangements within the scope of reporting. The domestic extension of reporting was considered to increase the costs and workload of intermediaries and also businesses, regardless of whether the extension would actually lead to more reportable arrangements.
The FTA agreed that extending the application of the current hallmarks to domestic situations would not be recommended but noted separate hallmarks might be required for that purpose. In any case the FTA was also hesitant whether this would be worth taken into the additional costs and administrative work and would need to be analyzed in detail in any case.
It seems that the number of reported arrangements in Finland has been even more limited than anticipated. With the DAC6 reporting obligation still in force, both intermediaries and taxpayers need to comply with the legislation and prepare sufficient analysis (and defense files if needed) to determine whether the reporting is due. The 30 days reporting deadline has also turned out difficult to comply with by taxpayers. When the FTA updates their DAC6 guidance going forward, it may be good time to re-visit the reporting processes and internal guidance of groups operating in Finland.