Does this only apply to corporation tax?
No, DAC6 covers a very wide range of taxes: income taxes, various duties and taxes, inheritance and gift taxes, registration, mortgage and court fees.
When is there a 'notifiable cross-border arrangement' that could come into view?
There must be several elements.
First and foremost, there must be an 'arrangement'. However, like most concepts of DAC6, this should be interpreted very broadly. Any form of advice, even an e-mail, can qualify.
In addition, this arrangement must be of a
- cross-border nature;
- the arrangement must have one or more hallmarks or essential characteristics;
- it needs to be verified whether the main benefit test criterion is met, if it applies.
What is 'cross-border'?
In order to be considered a cross-border arrangement, it must involve more than one Member State or a Member State and a third country and fulfil at least one of the following conditions:
- not all participants in the arrangement have their tax residence in the same jurisdiction;
- one or more participants in the arrangement have their tax residence in more than one jurisdiction at the same time;
- one or more participants in the arrangement carry out an activity in another jurisdiction through a permanent establishment situated in that jurisdiction and the arrangement involves part or all of the activity of that permanent establishment;
- one or more participants in the arrangement carry out an activity in another jurisdiction without having their tax residence in that jurisdiction or without creating a permanent establishment in that jurisdiction;
- such an arrangement may have implications for the automatic exchange of information or the determination of the beneficial ownership.
The following can, for example, be regarded as cross-border:
- the merger between two Belgian companies of a parent company established abroad;
- the group's financing activity is transferred from Belgium to another sister company abroad;
- a Belgian company provides group financing to a foreign subsidiary;
- Belgian residents set up a foreign company to acquire real estate abroad;
However, it is not because an arrangement is cross-border that it will actually have to be reported. The other criteria must also be present for this purpose.
What is a 'hallmark'?
Even if an arrangement is of a cross-border nature, it will only be notifiable if it has a 'hallmark'.
A hallmark is a characteristic or feature of a cross-border arrangement that is an indication of a possible risk of tax avoidance. There need not be any actual tax avoidance, it is sufficient that there is an indication of it.
These hallmarks fall into five categories:
- Category A includes the generic hallmarks linked to the main benefit test.
- Category B includes the specific hallmarks linked to the main benefit test.
- Category C includes the specific hallmarks related to cross-border transactions.
- Category D includes the specific hallmarks concerning automatic exchange of information and beneficial ownership
- Category E includes the specific hallmarks concerning transfer pricing.
Cross-border arrangements that fulfil hallmark A, B or C1, (b), 1st indent, (c) or (d) must also pass the main benefit test (MBT) in order to be notifiable.
The 'MBT': What is it?
This MBT (main benefit test) is satisfied if it can be demonstrated that, considering all relevant facts and circumstances, the main benefit or one of the main benefits that can reasonably be expected from an arrangement is obtaining a tax benefit.
In order to determine whether there is a tax benefit, the tax payable by the taxpayer, taking into account the arrangement, should be compared with the amount that would be payable by the same taxpayer in identical circumstances in the absence of the arrangement in question.
Isn't that only a problem for my adviser?
The new articles not only impose the reporting obligation on advisers. In many cases, this obligation will shift directly or indirectly to the taxpayer himself. At least the taxpayer will in many cases be involved or at least be informed about this.
The intermediaries or the relevant taxpayers of cross-border arrangements which fall under at least one of the hallmarks listed in the law and which pass the 'main benefit test', where this criterion applies, have an obligation to report this to the Belgian tax administration within a certain period of time.
There are 2 categories of intermediaries:
1st category: Any natural person who or legal entity which designs, markets, organises, makes available for implementation or manages the implementation of a notifiable cross-border arrangement (= promoter).
2nd category: Any person who knows or could reasonably know that he or she, directly or through other persons, has undertaken to provide help, assistance or advice with respect to the designing, marketing, organising, making available for implementation or managing the implementation of a notifiable cross-border arrangement (= service provider).
The relevant taxpayer is any person for whom a notifiable cross-border arrangement is made available for implementation, or who is ready to implement a notifiable cross-border arrangement or has implemented the first step of such an arrangement.
When do I have to report as a taxpayer?
Certain intermediaries (e.g. lawyers, accountants, tax consultants, etc.) may be exempted from the obligation to report notifiable cross-border arrangements. This is in particular the case where the reporting obligation would breach the professional secrecy of theintermediary, which is based on a legal provision and in accordance with the national law of that Member State.
When an intermediary invokes his professional secrecy, the obligation to report rests on:
- the other intermediary(s) if there is more than one intermediary;
- the relevant taxpayer.
The intermediary invoking professional secrecy must notify:
- any other intermediary(s) or
- in the absence of other intermediaries, the relevant taxpayer in writing and stating the reasons, that they are/he is subject to the obligation to report.
In any event, where an intermediary involved in a notifiable cross-border arrangement considers that he is bound by professional secrecy, he should inform the relevant taxpayer or the other intermediary(s) in a reasoned manner that he is unable to fulfil his duty of disclosure for reasons of professional secrecy.
In those circumstances, the relevant taxpayer should make the declaration himself.
Nothing, of course, prevents his adviser (intermediary) from assisting the relevant taxpayer in this technical matter in preparation for the notification. Your adviser can even - with a special power of attorney - make this notification in your name and on your behalf.