EU finance ministers reached an agreement on March 13, 2018, to tackle aggressive tax schemes in the EU.
- EU finance ministers swiftly agreed on measures to combat aggressive tax schemes influenced by the Panama Papers scandal's media attention.
- The directive mandates reporting of certain cross-border tax plans by intermediaries including lawyers, accountants and banks—creating new compliance obligations.
- Non-compliance with these reporting requirements may result in penalties with each EU member state determining specific infractions and sanctions.
- The agreement highlights the importance of transparency and collaboration to ensure fair taxation practices in the EU effective from July 2020.
Background
When the agreement was made, ECOFIN focused on the tax intermediaries directive proposed by the European Commission on June 21, 2017. As tax matters require unanimous agreement between all of the member states; it was notable that consensus was reached quickly.
The speed of the decision was widely attributed to the tremendous media attention surrounding the so-called Panama Papers: the 11.5 million leaked documents disclosed in 2015, that detailed financial and attorney-client information for more than 214,488 offshore entities, taken from a Panamanian law firm and corporate service provider by an anonymous source.
Content
Regarding the content of the agreement, it required mandatory reporting by tax intermediaries and enabled the automatic exchange of information between tax authorities of EU member states for certain cross-border arrangements. The agreement aims to ensure a fairer taxation in the EU by sharing sensitive information regarding possible aggressive tax planning schemes between EU countries.
Reporting Obligations
The reporting obligations apply to intermediaries such as tax advisors, accountants, banks and lawyers and any other operators who design and promote tax planning schemes for their clients. These intermediaries are required to report any cross-border tax planning arrangement they design or promote that contains specifically defined criteria to the tax authorities to any member state in which they are resident.
When an agreement is developed in-house by the taxpayer, advised by a non-EU adviser or subject to legal professional privilege, the taxpayer is required to notify the tax authorities directly. Each EU member state then shares the information gathered with all other member states on a quarterly basis.
Intermediaries
The concept of “intermediaries” under the directive is broad, which may result in new obligations for many operators. An exception made for those workers subject to legal or professional secrecy. In any case, the practical application of this exemption depends on the directive that has been transposed into each EU members’ national law.
Enforcement of the Agreement
To enforce the reporting obligations, ECOFIN agreed that penalties would be imposed on intermediaries that do not comply with the transparency measures. The concrete infractions and corresponding sanctions are specified by each country.
In Spain, taking into account other Anti-Tax Avoidance information obligations—as in form 720 to declare assets held abroad—it is inferred that sanctions under this framework are severe.
Adoption
The directive was formally adopted on May 25, 2018, during an EU council meeting. The directive applied from July 1, 2020, following a period of transposition during which EU member states were required to incorporate the directive into their national laws and regulations by Dec. 31, 2019.
Mariano Roca is a tax and private client practitioner focused on corporate and individuals advice (specialized in tax, wealth and inheritance advice for HNWI). He began his professional career at Cuatrecasas, Gonçalves Pereira from 1997 until 2012. In 2012, he joined KPMG from 2012 until 2015, where he co-led the family business and private client practice in the Barcelona, Girona, Balearic Islands and Andorra offices. In January 2016, he joined Marco Legal, Abogados & Economistas, leading as a partner the firm’s tax department. Mariano has been recognized in The Best Lawyers in Spain™ since 2013 for Tax Law. He was named the Best Lawyers® 2014 and 2018 Tax Law "Lawyer of the Year" in Barcelona. He also received the Best Lawyers 2015 and 2019 Family Law “Lawyer of the Year” award in Barcelona.
