Mandatory Disclosure Regime (MDR)

The EU introduced a directive on mandatory disclosure rules aimed at increasing transparency to detect potentially aggressive cross-border tax planning. We can work with you to identify and manage cross-border reporting obligations by leveraging our global network and up-to-date tools.

The team

Albert Anelli

Albert Anelli

EY Canada Managing Partner, Tax

What EY can do for you

The European Union (EU) Mandatory Disclosure Regime (MDR) will lead to extensive reporting obligations for a relatively wide range of tax arrangements, and there are no minimum threshold exceptions. Taxpayers and intermediaries must implement policies, procedures and processes to identify and capture details of transactions that they will need to disclose. On complex arrangements, taxpayers will need consult with their advisors. Penalties can be significant.

EY teams across the world can help taxpayers and intermediaries identify and manage their obligations under the MDR by:

  • Conducting strategy sessions to discuss and identify the impact of the MDR on their European and global tax strategy
  • Assisting in the development of process guidelines and/or policies for MDR reporting, from the day-to-day identification of reportable arrangements up to the data submission to the tax authorities
  • Conducting MDR workshops for the executive-layer teams (e.g., tax, M&A, internal compliance, transfer pricing, HR and law)
  • Providing MDR training programs to operational teams
  • Offering advice on how to evaluate a particular transaction that you are undertaking

Also, MDR Web — the EY cross-border assessment tool, described in the video above — is designed to evaluate, log and report cross-border arrangements. Through it, you can also access our technical guidance on the interpretation of Directive on Administrative Cooperation 6 (DAC 6) and country legislation.

Start your discussion on MDR compliance today — and, through careful planning, position yourself for readiness on Day One. 

Legislative overview

To increase fiscal transparency across the EU, the DAC 6 entered into force on 25 June 2018, requiring intermediaries — such as EU-based tax consultants, banks and lawyers — to report cross-border transactions and tax arrangements that the EU considers potentially aggressive, featuring certain hallmarks (such as deductible payments exempt of taxation at recipient level). If there are no intermediaries that can report, the obligation will shift to the taxpayers.

Under the MDR, cross-border arrangements where the first step is taken after 25 June 2018 and before 1 July 2020 must be reported no later than 31 August 2020, and Member States will automatically exchange this information. After 1 July 2020, intermediaries and taxpayers will be required to report within 30 days of a triggering event in respect of any tax arrangements.

Member States must adopt and publish domestic legislation to comply with DAC 6 by 31 December 2019. Some Member States may require earlier reporting and extend the scope of domestic legislation beyond the requirements of the Directive — for instance, to cover VAT, domestic arrangements or introduce additional hallmarks.

  • Challenges for taxpayers

    Taxpayers undertaking activities in the EU covered by the Directive will have an obligation to disclose in situations where:

    • Their advisors are located outside the EU or
    • All their advisors are exempt from disclosing because of legal professional privilege, or
    • They managed the arrangement in house

    The taxpayer will need to take appropriate measures to put in place policies, procedures and processes to identify and capture details of transactions that they will need to disclose themselves.

    The taxpayer’s advisors will disclose using information available to them. The tight reporting deadlines imposed by the MDR may result in inconsistent reporting which may lead to unwarranted tax audits. On complex arrangements, taxpayers will need to identify and consult with their advisors to achieve coordinated consistent reporting.

    The EU Member States have until 31 December 2019 to implement DAC 6. Current indications are that certain countries will or have extended their legislation to widen the scope to cover VAT, domestic arrangements, other hallmarks or bring the timing of reporting forward. It is worth noting that the additional information beyond the scope of the minimum standards as set out by DAC 6 should not be subject to exchange between Member States. Clients will need to keep abreast of country developments to meet local reporting requirements as some countries have chosen to apply significant penalties for non-compliance.

  • Challenge for intermediaries

    Certain organizations will meet the criteria to be regarded as an intermediary, for example financial institutions and other providers of tax advice. Intermediaries will need to develop systems and governance processes to report the qualifying arrangements that they have advised clients on, or assisted clients with. For example:

    • Identify entities within their organization that have reporting obligations under DAC 6 and domestic legislation.
    • Identify and understand the types of activities undertaken by their organization on behalf of clients that are likely to be covered by DAC 6 and domestic legislation.
    • Create and implement governance policy on MDR and monitor procedures for compliance.
    • Implement a system/tool to evaluate, log and report arrangements.
    • Educate stakeholders (inside and outside the tax department) and enhance awareness and compliance with EU mandatory disclosure rules.

DAC 6 updates

This monthly newsletter provides insight and technical information leading up to DAC 6 implementation on 1 July 2020.

Designing and implementing your long-term compliance program for the EU mandatory disclosure rules (MDR) (January 2020)

Alerts about MDR

Are you staying up-to-date on timely analysis related to MDR? Check out the latest developments and country-specific updates.

 

Counting down to MDR: How EU countries are implementing DAC6 and appropriate responses

Panelists discuss evolving legislative position of Mandatory Disclosure Regime across EU.

Watch replay

Webcast: EU MDR update and practical insights

Panelists discuss what taxpayers should do to implement internal controls and procedures to manage their MDR obligations.

Watch replay

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