The European Union increased the transparency to expose potentially aggressive tax arrangements. Let us help you ensure that you comply with the reporting requirements of the European Reporting Act (DAC6).

What is DAC6?

The new EU mandatory disclosure framework known as DAC6 (Directive 2018/822) requires the mandatory reporting of cross-border agreements. Following an initial extension of reporting deadlines by the majority of member states because of the Covid-19 epidemic, the need for disclosure is now in effect.

Who would be required to report?

If an agreement has any of the following characteristics and involves more than one EU member state or an EU member state and a third country, it is deemed to be cross-border.

• The agreement’s partners are not all tax residents of the same nation.
• One or more participants are either not tax residents or tax residents in more than one country.
• The tax arrangement makes up all, or a portion of the business conducted by one or more participants through a permanent establishment in another nation.
• One or more participants do business abroad without establishing a permanent presence there or becoming a resident for tax reasons.
• The arrangement may have an impact on the identification of the beneficial owner or the information interchange that happens automatically.

What is the reporting process?

DAC6 necessitates the continuous collection, and reporting of company-specific data, as well as the active participation of multiple company personnel, not just the tax department.The reporting process needs to report arrangements within 30 days. They demand extensive country coverage and frequency of reporting. The reports must be submitted to tax authorities in electronic format, following very specific schemas, and must pass validation rules.

The following information must be reported:

1. The identification of the intermediaries and taxpayers, including their name, date and place of birth, tax residence and tax identification number.
2. Detailed information on the hallmarks according to which the cross-border arrangement must be declared.
3. A summary of the contents of the reportable cross-border arrangement.
4. The date of which the first stage of implementation of the reportable cross-border arrangement has been or will be completed.
5. Detailed information on the legal provisions of the countries concerned underlying the cross-border arrangement. 
6. The value of the cross-border arrangement.
7. Identification of the Member State of the taxpayer(s) concerned and of any other Member State likely to be affected by the cross-border arrangement.
8. Identification of the Member State, of the taxpayer(s) concerned, and of any other Member State likely to be affected by the cross-border arrangement.

The information must be sent by electronic filing on the secure state platform. The practical implementation of the automatic exchange of cross-border arrangements within the DAC 6 is carried out by the division of exchange of information and withholding tax on interest.

In essence, tax advisors, tax law firms, and lawyers are among the intermediaries who must fulfill the obligations under the DAC 6 guidelines if a client implements aggressive tax reduction measures.The DAC6 is implemented in the Bulgarian legislation and in force since 01 July 2020. If you are interested in DAC6 advice or support, please contact us! We at TGS Bulgaria would be happy to assist you.