The European Council has made a final agreement for new rules on tax information exchange between tax consultants and other intermediaries, such as tax advisors, accountants, and lawyers, who advise on tax. This rule will apply to cross-border transactions that meet certain characteristics, which indicate undesirable tax planning and will have a deadline of 31 December 2019 for all EU member states. These mandatory rules are built on the back of other European transparency and anti-abuse measures with the aim to prevent tax avoidance.
If you are advised on cross-border transactions with one of the following characteristics, your advisor may need to exchange information about this transaction with the tax authorities. These characteristics occur in transactions where a tax-deductible payment is made to another company where:
- The recipient of the payment for tax laws not established in any jurisdiction; or
- The recipient of the payment is established in a country where no or very little profit tax is levied; or
- The payment in the country of the recipient is exempt from the profit tax; or
- The payment in the country of the recipient is subject to a particularly advantageous tax regime
Intermediaries and, in some cases taxpayers, will have to exchange information on cross-border transactions with these characteristics. Other stipulations are that it must be a transaction involving at least one EU member state and it may involve transactions with consequences for income taxes or other direct taxes, such as salary splits. These are only mandatory if the tax benefit is the main objective, or one of the main objectives, of the transactions.
Any information that should be reported, must be done within 30 days after the transaction has been advised or can be set up. When the member states have received the information, it is exchanged with other member states through a centralized database, to which the transaction applies.
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