DAC-6 Compliance

Purpose

The EU directive on Mandatory Disclosure Rules (MDR) for intermediaries (DAC6) is against potentially aggressive tax arrangements and opaque structures. The directive requires mandatory reporting of cross-border arrangements and considerably impacts intermediaries, such as, banks, asset managers, financial and tax advisors, tax specialists and wealth managers. Intermediaries will have to disclose information on cross-border arrangements, including the date of the arrangement and its value.

Legal regulation in Lithuania:

  • Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU as regards the mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements;
  • Council Directive (EU) 2020/876 of 24 June 2020 amending Directive 2011/16/EU to address the urgent need to defer certain time limits for the filing and exchange of information in the field of taxation because of the COVID-19 pandemic;
  • Article 61(2) of the Law on Tax Administration
  • Rules adopted by the STI:
    • December 20, 2019 No. VA-109; and
    • July 30, 2020 No. VA-59.

Taxes

All taxes except for VAT, excise, customs and social insurance contributions.

What is being reported

Notification of a cross – border arrangements involving several EU Member States or EU Member State and third country. A cross-border arrangement should meet at least one or more of the indications (the so-called “Hallmarks”) showing that there is a potential risk of tax evasion.

 

Hallmarks

A hallmark is defined as a characteristic or feature of a cross-border arrangement that presents an indication of a potential risk of tax avoidance, as listed in Annex IV of the Directive. The legislative proposal imposes mandatory disclosure (reporting) requirements for arrangements with an EU cross-border element that meet one or more of the listed hallmarks. Halmarks are divided into those for which both the main benefit test (MBT) should be met and those for which the MBT is not required.

Reporting person

Intermediaries,  where there is no intermediary (a cross – border agreement is drawn up without intermediaries or intermediaries operating outside the EU) – the tax payer itself.

Intermediary

Person/entity: 1) who prepares a notifiable cross-border agreement, offers it on the market, organizes it implementation, submit it for implementation or administer it; 2) which provides assistance, support or advice, directly or through intermediaries, relating to the preparation of the agreement, its marketing, the organization of implementation, submission for its implementation or its administration. It can be natural person/entity:  permanent resident of the Republic of Lithuania or Lithuanian taxable unit;  operating in the Republic of Lithuania through a permanent establishment or base;  is established in the Republic of Lithuania or is subject to national legislation; a member of a professional association providing legal, tax or consulting services registered in Lithuania.

Deadlines

Council Directive (EU) 2020/876 of 24 June 2020 postponed deadlines for 6 months. The new deadlines:

  • June 25, 2018 – June 30, 2020 cross-border arrangements – February 28, 2021;
  • July 1, 2020 – December 31, 2020 cross-border arrangements – within 30 days from January 1, 2021;
  • Later on- within 30 days after the end of the quarter (e.g. April 30, 2021).