DAC6 and the use of safe harbours in non-EU jurisdictions

MNEs making use of safe harbour taxation rules, in the E.U. as well as in third-countries, may oblige the E.U.-based taxpayers within the MNEs to report these safe harbour arrangements to tax authorities in the E.U. under the E.U. Directive on Mandatory Disclosure Rules (“DAC6”). In this blog, we take a look at the safe harbour provisions of non-E.U. jurisdictions (specifically, India and Brazil) and when making use of these safe harbour provisions may give rise to a reporting obligation under Hallmark E.1 of DAC6. The blog also sheds some light on transfer pricing methods for pricing low value-adding intragroup services (“LVAS”) as defined in Chapter VII of the OECD TP Guidelines.

15 Jan. '21 Patrick T.F. Schrievers

E.U. Directive on Mandatory Disclosure Rules/DAC6

DAC6 imposes mandatory reporting of cross-border arrangements, affecting at least one Member State, where the said arrangements fall within one of a number of specified “Hallmarks”. The use of the words, “affecting at least one Member State”, means that the reportability of arrangements under the Directive is not limited to cross-border transactions within the E.U; it also includes arrangements between entities in the E.U. and entities in non-E.U. jurisdictions (for instance, an arrangement/transaction between a Dutch company and an Indian/Brazilian company). The aim of the DAC6 Directive is to improve tax-transparency and tackle potentially aggressive (cross-border) tax-planning arrangements in order to protect the tax base of the E.U. Member States.

Patrick T.F. Schrievers

Patrick T.F. Schrievers is a tax lawyer and member of the Dutch Association of Tax Advisers (NOB) and the International Fiscal Association (IFA).

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