EU Directive on Mandatory Disclosure for Intermediaries – “DAC6”

On the 13 March 2018 the ECOFIN Council reached an agreement to adopt the European Commission’s proposals to amend the Directive 2011/16/EU on administrative cooperation in the field of taxation by imposing mandatory disclosure rules on intermediaries who assist in tax aggressive arrangements. These proposals are inspired by BEPS Action 12, an ongoing related project at an OECD level.

The main purpose of these amendments, which are known as DAC6, is to provide a mechanism that will enhance and increase tax transparency throughout the EU and have a deterrent effect and dissuade EU based intermediaries from designing, implementing and marketing such tax aggressive cross-border arrangements, which effectively result in tax avoidance.

Who must disclose

The disclosure obligation lies with the intermediary, provided that the intermediary is either:

  1. A tax resident in a Member State; or
  2. Incorporated in and/or governed by the laws of a Member State; or
  3. Registered with a professional association related to legal, taxation or consultancy services in at least one Member State; or
  4. Based in at least one Member State from where it exercises legal, taxation or consultancy services.

An intermediary is defined as (i) any person (natural or legal or even an entity without legal personality) that designs, markets, organises, makes available for implementation or manages the implementation of the tax aspects of a cross-border arrangement (or series of such arrangements) that is rendered reportable; and (ii) any such person that undertakes to provide, directly or by means of other persons to which it is related, material aid, assistance or advice with respect to designing, marketing, organising or managing the tax aspects of a reportable cross-border arrangement.

In essence, any legal professional, consultant, accountant, financial advisor, tax advisor or financial institution, trust company and insurance intermediary, capable of undertaking the above will be caught under the definition of intermediary.

In cases where the intermediary has no presence within the EU or where the intermediary relies on legal professional privilege, the disclosure obligation shifts to any other intermediary involved in the transaction in the first instance or even to the taxpayer concerned where no intermediary is involved due to the arrangement being designed/implemented in-house.

Threshold for disclosure

A cross-border arrangement means an arrangement concerning either more than one Member State or a Member State and a third country. For a cross-border arrangement to be rendered reportable it has to be considered as ‘tax aggressive’. Although DAC6 does not define the term tax aggressive, reference is made to a number of features and elements of transactions and arrangements that present a strong indication of tax avoidance or abuse. These features and elements are referred to as hallmarks (listed in Annex IV of DAC6) and it suffices if an arrangement falls within the scope of at least one of those hallmarks to be treated as reportable. DAC6 provides for separate categories of hallmarks, some of which will only be rendered reportable if the ‘main benefit test’ is met. For this test to be met, it will have to be established that the main benefit or one of the main benefits of an arrangement is to obtain a tax advantage.

When to disclose and automatic exchange of information

The intermediary or taxpayer (depending on the facts of each case) will be required to disclose a reportable arrangement to the local tax authorities within 30 days from the day the arrangement is made available to the taxpayer or when it is ready for implementation or even when the first step of such arrangement has been implemented.

Thereafter, the competent authorities of the Member State to which the arrangement is disclosed, must automatically communicate and share this information with the competent authorities of all other Member States through the automatic exchange of information database that is already in place with regards to the Common Reporting Standard. The automatic exchange of such information must be taking place every three months.

Entry into force, domestic implementation and retroactive effect

The final text of DAC6 is in the process of being finalised and it will enter into force on the twentieth day following the date of its publication in the Official Journal of the EU. It is estimated that the entry into force will likely occur around June/July 2018. Each Member State must implement DAC6 into their domestic laws and regulations by 31 December 2019 and be in position to apply the new mandatory disclosure rules by 1 July 2020.

Due to the retroactive effect of DAC6, the new mandatory disclosure rules will cover arrangements where the first implementation step occurred during the period between the date of publication and the date of entry into force.

Therefore, the first disclosure of reportable arrangements to local authorities must be made by 31 August 2020 and the first automatic exchange of information between Member States will likely occur by 31 October 2020.

It is interesting to note that it is up to each Member State to decide what penalties will be imposed for non-compliance with DAC6.


The aim of DAC6 is to deter and combat any engagement in tax avoidance and abuse, however the provisions of DAC6 are so broadly drafted that they create uncertainty and raise questions as to whether the implementation of DAC6 will result in effective targeting of arrangements aimed to be caught under DAC6, and whether there is potential for incorrect targeting of arrangements which are not intended to be caught by DAC6. Furthermore, there are concerns as to whether the exchange of such information and arrangements between Member States will ultimately be useful.

It is also important to consider how claiming legal professional privilege under DAC6 will work in practice, noting that in claiming such privilege, the burden to disclose may be shifted from the legal professionals to their client.

It is nevertheless advisable that intermediaries begin assessing and monitoring the advice they provide to their clients to avoid falling within the ambit of DAC6, noting its retroactive effect.