Reporting cross-border transactions / tax arrangements

Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU in respect of mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (“the Directive”) supplements the reporting obligations for certain categories of entities.

Cross-border arrangements refer to, among others: tax optimization structures in several jurisdictions and cross-border transactions consisting in the transfer of intangible assets or transfers of lines of business between related parties. The entities falling under the scope of this reporting obligation are represented by intermediaries, respectively any person that designs, markets, organises or makes available for implementation or manages the implementation of a reportable cross-border arrangement, but also taxpayers themselves, in certain cases.

 

The entities subject to the reporting obligation must be proactive in initiating internal programs and procedures designed to enable the identification of the cross-border transactions/tax arrangements to be reported. The adequate collection and organization of the necessary information and the observance of the reporting deadlines should be ensured. Such programs should include action points such as:

  • Naming a person within the entity to be responsible with both keeping track of internal flows of information and documents, as well as with legislative updates and the interpretation of the tax authorities regarding reportable transactions;
  • The design and implementation of straightforward procedures (inclusively by means of software implementation), with the purpose of identifying reportable transactions, as well as analyzing their characteristics;
  • The design and deployment of review and approval processes for the identified transaction, in light of the reporting obligation.

 

The first effective reporting deadline to be observed by the entities subject to the obligation established by the Directive is the 31st of August 2020. 

 

An essential aspect to be considered for this reporting deadline is that the transactions to be reported are the ones carried out during the period 25th of June 2018 – 1st of July 2020. Therefore, the reporting entities should treat the new obligation with diligence and initiate internally the analysis of potentially reportable transactions, by organizing the available information and assessing them with the purpose of identifying the transactions which are subject to reporting.

 

The reportable transactions are represented by cross-border transactions and tax optimization structures, concerning either more than one EU Member State or an EU Member State and a third country, that fulfill certain conditions and exhibit certain hallmarks.

 

A dedicated Mazars team is available to assist along this demanding process, so as that by the first reporting deadline, the entity adequately fulfills its reporting obligations. Mazars offers a full range of services in light of the observance of the new reporting obligations, as follows:

  • Review of potential reportable transactions and guidance for the taxpayer in gathering additional information / assessing the need to report;
  • Training for the employees of the taxpayer, so that they become accustomed to the transactions that need to be monitored and understand the importance of this exercise;
  • Draw up internal procedures, both in respect of tracking information and identifying reportable transactions, as well as in verifying and validating them;
  • Assistance with assessing potential/future transactions from the perspective of the reporting obligation;
  • Making available a software platform developed internally by Mazars, for managing the reporting obligations.

Our team closely monitors the unfolding of the discussions regarding the transposition of the Directive in the Romanian legislation and the difficulties pinpointed by the business community, as well as the approach of the tax authorities and is in permanent contact with the Mazars network, in order to understand the trends and interpretation of the Directive in the national legislation of other EU Member States. Moreover, the involvement of the Mazars international network is essential considering the cross-border nature of transactions subject to reporting which raises the issue of implications in more than one jurisdiction; therefore, the coordination of the efforts of entities from various jurisdictions is necessary.