Increasing Transparency and Combating Tax Avoidance. The Directive on Administrative Cooperation – DAC 6, a European Union directive, plays a significant role in enhancing transparency and cooperation among EU member states to address aggressive tax planning and tax avoidance. Explore the key features and implications of DAC 6 in Cyprus and gain insights into how it impacts businesses and intermediaries, both within and outside the EU.

In general, the Directive on Administrative Cooperation – DAC 6

The Directive on Administrative Cooperation – DAC 6, is a European Union (EU) directive aimed at enhancing transparency and information exchange among EU member states in the field of taxation. It introduces reporting requirements for certain cross-border tax arrangements and is part of a broader effort to combat aggressive tax planning and tax avoidance.

Key features

Key features of Directive on Administrative Cooperation – DAC 6 for tax purposes include:

Mandatory Reporting: Under Directive on Administrative Cooperation – DAC 6, certain intermediaries like tax advisors, consultants, lawyers, and financial institutions that design, promote, or assist with the implementation of reportable cross-border arrangements and, in some cases, taxpayers themselves, are required to report cross-border arrangements that meet specific hallmarks. These hallmarks are indicators of potentially aggressive or tax-avoidance-related transactions.

Directive on Administrative Cooperation – DAC 6 defines specific hallmarks that trigger reporting requirements. These hallmarks include certain characteristics or features of transactions that may indicate potential tax avoidance. They are categorised into categories A, B, C, D, and E, with Category A being the most serious.

The directive covers cross-border arrangements, which involve at least one EU member state and may also include non-EU countries. The reporting obligation is triggered when a cross-border arrangement contains one or more hallmarks.

Reports of reportable cross-border arrangements must be made within prescribed timelines. The reporting obligations began to apply retroactively from June 25, 2018.

The information reported under Directive on Administrative Cooperation – DAC 6 is exchanged among EU member states to enhance cooperation and enable tax authorities to assess the potential risks associated with specific arrangements.

Failure to comply with the Directive on Administrative Cooperation – DAC 6 reporting requirements can result in severe penalties and sanctions imposed by national tax authorities.

It’s important to note that while the Directive on Administrative Cooperation – DAC 6 is an EU directive, it has implications for businesses and intermediaries located both within and outside the EU. Non-EU intermediaries that have a presence or involvement in cross-border arrangements that impact EU member states may have reporting obligations.

Further information

For further information on Directive on Administrative Cooperation – DAC 6 refer to our publications following the links below:

In Cyprus, Directive on Administrative Cooperation – DAC 6:

In Cyprus, the Directive on Administrative Cooperation (DAC 6) is transposed into domestic law and is implemented as part of the country’s efforts to enhance transparency and combat aggressive tax planning and tax avoidance. Cyprus Administrative Cooperation – DAC 6 requires the reporting of certain cross-border arrangements that exhibit specific hallmarks indicating potential tax avoidance.

In summary

Cyprus has embraced the Directive on Administrative Cooperation – DAC 6 to enhance transparency and combat tax avoidance through the reporting of specific cross-border arrangements. Staying compliant with these regulations is crucial for businesses and intermediaries to avoid penalties and ensure tax integrity.

Ensure compliance with Cyprus’s DAC 6 regulations

Connect with our experts for guidance on reporting obligations.

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