EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

The COVID-19 outbreak is a severe public health crisis which has affected all Member States. It poses a major challenge for public health care systems and is likely to have severe implications for the Union’s economies for an extended period of time. This situation creates an overwhelming disruption in the life of citizens and businesses, who struggle to carry out their activities due notably to the constraints linked to the lockdowns in many Member States.

In light of these unprecedented circumstances, a number of Member States and persons liable to report information under Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation have requested the deferral of certain deadlines for the filing and exchanging of information under this Directive. More specifically, the requests for deferral pertain to automatic exchanges of information on financial accounts of which the beneficiaries are tax resident in another Member State and reportable cross-border arrangements that feature in Annex IV to Council Directive 2011/16/EU. The severe disruption caused by the COVID-19 pandemic hampers the timely compliance of financial institutions and of the persons liable to report cross-border arrangements and affect negatively the capacity of Member States’ tax administrations to collect and process the data.

This situation requires an urgent and coordinated response within the Union and where relevant at global level. In this regard, it would be useful to take into account the initiative of the Steering Group of the Global Forum with respect to the common reporting standard (CRS) for Reporting Financial Institutions, the latter being transposed in Union law via Council Directive (EU) 2014/107.

It is therefore necessary to defer the deadline for the exchange of information on financial accounts of which the beneficiaries are tax resident in another Member State. This would accordingly allow Member States to adjust their national deadlines for the filing of such information by the Reporting Financial Institutions. In the same vein, the deadlines for filing and exchanging information on cross-border arrangements under Annex IV of Council Directive 2011/16/EU should also be extended.

Meanwhile, it should also be recalled that the exchange of information on financial accounts of which the beneficiaries are tax resident in another Member State and on reportable cross-border arrangements under Annex IV to Council Directive 2011/16/EU is crucial in the fight against tax avoidance and tax evasion in the Union. Member States will need tax revenues to finance their considerable efforts to contain the negative economic impact of the measures against the COVID-19 pandemic. Ensuring tax fairness by preventing tax avoidance and tax evasion becomes more important than ever. While the current crisis calls for adjusting the calendar for filing and transmitting some tax data, it should not lead to relinquishing the efforts of national administrations for ensuring fair taxation.

The length of the deferral should not disrupt the established structure and functioning of Council Directive 2011/16/EU. Rather, it should be of limited duration, in proportion to the practical difficulties caused by a temporary lockdown aiming at containing the pandemic.

Considering the current uncertainty about the evolution of the COVID-19 pandemic, it is useful to provide for the possibility of one further extension of the deferral period for filing and exchanging information. This would be necessary if during part or all of the period of deferral, the exceptional circumstances of severe risks for public health caused by the COVID-19 pandemic persist and Member States have to either implement new or continue existing lockdown measures. Such extension should not disrupt the established structure and functioning of Council Directive 2011/16/EU. Rather, it should be of a limited and pre-determined duration in proportion to the practical difficulties caused by the temporary lockdown. The extension should not affect the essential elements of the obligation to report and exchange information under this Directive. It may merely extend the deferral of the deadline for complying with such obligations while ensure that no information remains without eventually being exchanged.