DAC6 Newsletter
Designing andimplementing your longterm compliance program
for the EU mandatory
disclosure rules (MDR)
January 2020

Overview
The Council of the European Union (EU) has adopted Directive 2018/822 (DAC6 or theDirective) on the mandatory disclosure and exchange of cross-border tax arrangements.
The Directive, which entered into force on 25 June 2018, requires intermediaries andtaxpayers to report cross-border arrangements that are considered by the EU to be“potentially aggressive.” The information about the cross border reportablearrangements will be automatically exchanged between the EU Member States.

Designing and implementing your long-term DAC6 compliance program
The obligations under the EU mandatory disclosure rules (DAC6) will not end with the initial reporting made byintermediaries and/or taxpayers. In fact, this is just the beginning of the DAC6 compliance life cycle. Taxpayers
and intermediaries will need to design and implement a DAC6 compliance program that covers the end-to-end
DAC6 process, including:Identify,
assess andset aprocess

ReportComplyandreconcile

Audit andcontroversyCheck•

Identifying, assessing and reviewing potentially reportable arrangements•

Implementing new governance policies, processes and responsibilities for collation of data,assessment, review, decision-making and reporting•

Managing intermediaries, including having input and control over the decision-making andreporting process•

Preparing and submitting the initial report for the two-year transitional period to the EU tax
authorities by 31 August 2020*•

From 1 July 2020, fulfilling the ongoing reporting obligations within 30 days of a “triggering event”•Primary responsibility to disclose rests with each intermediary; however, it is the relevant taxpayer’s
responsibility to disclose if no intermediaries with EU nexus or all intermediaries with EU nexus
covered by LPP•

Reconciling the DAC6 reporting to other filings made to EU and non-EU tax authorities, including
annual tax returns, transfer pricing documentation, country-by-country reporting (CbCR) andresponses in the context of tax audits/assessment•

Complying with the annual reporting disclosure required to be made by taxpayers in certain EU
Member States•

Evidencing DAC6 compliance to the internal and external auditors•

Tracking all information that has been reported to the EU tax authorities, along with information thathas been analyzed, assessed and ultimately deemed not reportable•

Preparing a support file in advance of an investigation by the tax authorities and complying with any
audit information requests relating to both reported and not reported arrangements•Automating the DAC6 compliance process as much as possible to expedite the assessment andreporting time frames and to limit the risk of errors•

Regularly “health checking” the DAC6 compliance program*This is not the case for Poland, where the law is in effect and reporting obligations are already being triggered.

2DAC6 Newsletter — January 2020

The five key steps to a successful DAC6 compliance program1

Increasing awareness and technical knowledge
It is critical to raise awareness of DAC6 with the board, management and other key stakeholders
within the organization. The board and management should have a broad understanding of the new
disclosure rules, as well as the potential penalties and reputational risk of noncompliance. They canalso support and promote change and compliance within the organization.
The scope of taxes and hallmarks under DAC6 and the local country legislation is sufficiently broad.
Insufficient technical knowledge may result in the failure to report relevant transactions or overreporting. Internal tax teams must be familiar with the technical elements of DAC6 and the local
country legislation and regulations, as well as understanding who is responsible for reporting, when
the reporting will need to take place and what information will need to be reported. Training isnecessary for tax teams to stay up to date with any changes in local country interpretations, so theteam’s assessment of arrangements is in line with market practice in the different jurisdictions.

2Identifying and assessing potentially reportable transactions
In determining the arrangements that are likely to be reportable under DAC6, taxpayers andintermediaries will need to consider all the technical elements of the legislation, including each of the
15 hallmarks and, where relevant, the main benefit test. This analysis will also require a detailed
consideration of the relevant DAC6 commentary and the local country regulations, interpretation andguidance, all of which may need to be translated from the local language into English.
The 15 hallmarks in DAC6 have been set as wide-ranging as possible. This has led to different
interpretations taken by the EU Member States. In some cases, the mere presence of a hallmark will
make arrangements reportable. In other cases, one of the main benefits of the arrangement must be atax benefit for the arrangement to trigger a reporting obligation. Significant care must be taken inreporting any arrangements under the hallmarks requiring satisfaction of the main benefit test, even
where they are used for legitimate tax purposes as permitted under existing legislation.
While any arrangements that predate 25 June 2018 will effectively be “grandfathered” under DAC6,taxpayers will still need to track these to determine whether the arrangements will be brought within
the scope of DAC6 on amendment and/or expiration.

3

Managing your intermediaries
Taxpayers and intermediaries will need to implement processes and controls that will underpin andgovern their DAC6 relationship. These processes should involve taxpayers in the decision-making
process for DAC6 reporting, especially in relation to reporting under any of the hallmarks that require
the satisfaction of the main benefit test. It is recommended that taxpayers annually review andreconcile all arrangements reported by intermediaries, to confirm that the reporting is accurate,complete, timely and consistent. Taxpayers will also need to liaise with their intermediaries to obtain acopy of the reported information and the arrangement identification number, so the taxpayers havethe necessary information required to comply with their annual reporting obligation in some EU
Member States.
In some cases, the internal tax department itself may be classified as intermediary and have the mainobligation for reporting.

3DAC6 Newsletter — January 2020

4Complying with your primary and secondary reporting obligations
Taxpayers will need a process to manage their reporting obligations under the local country legislation,including:• Understanding and complying with the reporting format for each country• Preparing templates for reporting• Preparing and lodging reports within 30 days of a triggering event• Securely storing the data, submitted reports, the arrangement identification number and otherinformation required for annual reporting in some EU Member States• Complying with the secondary annual reporting obligation in those jurisdictions where this isimplemented (i.e., the obligation for each taxpayer to file information about its use of thearrangement to the tax administration in each of the years for which the taxpayer uses it)

5“Health checking” your DAC6 compliance program
Taxpayers and intermediaries will need to continuously review and update their DAC6 complianceprogram to verify that it continues to be compliant and fit for purpose. As part of the health check of
their DAC6 compliance program, taxpayers and intermediaries will need to:• Check that processes to identify, assess and report arrangements are adequate• Identify any inefficiencies in the existing processes• Adjust processes and policies to reflect any changes impacting the DAC6 compliance program(in personnel, type of transactions, entities and jurisdictions)• Adapt processes to align with changes in the DAC6 rules, including local interpretations• Determine whether the processes in place are adequate for identifying the relevant intermediaries
and achieving the right coordination among them
• Confirm that the data repository used to store the relevant DAC6 information (whether ultimately
reported or not) is secure, preserved and archived• Confirm that the information available in the data repository provides sufficient information for theannual reporting (in the jurisdictions where required)• Cross-check their DAC6 reporting for consistency against all other documents lodged with tax
authorities globally, including annual tax returns, transfer pricing documentation, CbCR andresponses in context of tax audits/assessment

4DAC6 Newsletter — January 2020

DAC6 local country implementation status
Under the terms of the Directive, the 28 EU Member States are required to adopt and publish national laws tocomply with DAC6 by 31 December 2019. As at 8 January 2020, Austria, Belgium, Croatia, Denmark, Estonia,Finland, France, Germany, Hungary, Ireland, Lithuania, Malta, the Netherlands, Poland, Slovakia and Slovenia
have adopted final legislation implementing DAC6. A further 11 Member States have published draft DAC6
legislation, namely, Bulgaria, Cyprus, Czech Republic, Italy, Latvia, Luxembourg, Portugal, Romania, Spain,
Sweden and the United Kingdom.
The domestic DAC6 legislation that has been enacted to date and/or made available in draft indicates there will bedifferences in the interpretation and application of DAC6 across the 28 EU Member States. Taxpayers andintermediaries should confirm that they have sufficient resources and tools to translate, assess and track thesedifferences in the legislation, interpretation and reporting requirements to enable compliance with DAC6.

MDR Web is a web-based logging andreporting tool that provides a
standardized and consistent approachto evaluate arrangements and to
manage communication between
taxpayers and intermediaries andsubmission of reportable arrangements.
Click here to register for an MDR Web
demonstration.

Key contacts
US-based DAC6 resources
Jose A. (Jano) Bustos
E: joseantonio.bustos@ey.com
Gerrit Groen
E: gerrit.groen@ey.com
Serge Huysmans
E: serge.huysmans@ey.com
Nadine Redford
E: nadine.k.redford@ey.com
Max Van den Bergh
E: max.vandenbergh@ey.com

Global DAC6 teamCornelia Wolff
E: cornelia.wolff@de.ey.com
Rienk Kamphuis
E: rienk.kamphuis@nl.ey.com
Claire Acard
E: claire.acard@ey-avocats.com
James Guthrie (FSO)
E: jguthrie@uk.ey.com

Global DAC6 webpage can be accessed here.
Global tax alerts — current and future — can be accessed atwww.ey.com/taxalerts.
5DAC6 Newsletter — January 2020

EY | Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in assurance, tax, transaction andadvisory services. The insights and quality services wedeliver help build trust and confidence in the capital markets
and in economies the world over. We develop outstanding
leaders who team to deliver on our promises to all of ourstakeholders. In so doing, we play a critical role in building abetter working world for our people, for our clients and forour communities.
EY refers to the global organization, and may refer to one ormore, of the member firms of Ernst & Young Global Limited,each of which is a separate legal entity. Ernst & Young
Global Limited, a UK company limited by guarantee, does notprovide services to clients. Information about how EY
collects and uses personal data and a description of therights individuals have under data protection legislation areavailable via ey.com/privacy. For more information about
our organization, please visit ey.com.
Ernst & Young LLP is a client-serving member firm ofErnst & Young Global Limited operating in the US.
© 2020 Ernst & Young LLP.
All Rights Reserved.
EYG no. 000116-20Gbl
1912-3342707
ED NoneThis material has been prepared for general informational purposes only and is
not intended to be relied upon as accounting, tax or other professional advice.
Please refer to your advisors for specific advice.

ey.com