On the 4th January 2021, the Commissioner for Revenue has published guidelines (the “Guidelines”) which seek to provide additional clarity as regards the reporting obligations arising in terms of Council Directive (EU) 2018/822 of 25th May 2018 (“DAC 6” or “Directive”) regarding the mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements.
Scope and Applicability
The Directive was transposed into Maltese law by virtue of legal notice L.N. 342 of 2019 which amended S.L. 123.127, entitled the Cooperation with Other Jurisdictions on Tax Matters Regulations, and has been in effect since 1st of July 2020.
The transposition of DAC 6 across the EU and likewise into Maltese law as afore-mentioned, has significantly raised the bar in terms of enhanced tax transparency and is thus regarded a pivotal tool in the fight against tax fraud and tax evasion.
Who is captured under DAC 6?
DAC 6 introduces a mandatory disclosure regime in terms of which certain persons, meeting the definition of an ‘Intermediary’ under the Directive, must identify and subsequently report to the Maltese tax authorities, any cross-border arrangement involving at least one EU Member State, where such comprises of one or more of the ‘hallmarks’ (characteristics) identified within the Directive.
The definition of Intermediary is rather far-reaching, such that it captures any person (whether natural or legal) who has designed, marketed, assisted with, advised upon, organised or managed the implementation of, a particular reportable cross-border arrangement.
It is important to note that a person qualifying as an Intermediary will be bound by reporting obligations to the Maltese tax authorities only to the extent of there being a direct nexus between such Intermediary and Malta, as would be the case in any of the following situations:
- the Intermediary is resident for tax purposes in Malta;
- the Intermediary has a permanent establishment in Malta through which the services with respect to the arrangement are provided;
- the Intermediary is incorporated in Malta, or governed by the laws of Malta; or
- the Intermediary is registered with a professional association related to legal, taxation or consultancy services in Malta.
Consequently, persons and entities such as lawyers, accountants, tax advisors and banks, who provide a service to a taxpayer as an external party and who satisfy any one of the afore-mentioned aspects, must fundamentally take heed of the Guidelines and regularise their position so as to adhere to any arising reporting obligations within the stipulated timelines.
It is also notable to point out that the reporting obligations nevertheless shift upon the taxpayer itself in case there are no Intermediaries or alternatively, where a particular Intermediary has waived the obligation to report on the basis of claiming legal professional privilege.
The full Guidelines may be accessed through the following link: Guidelines on the Mandatory Automatic Exchange of Information in relation to Cross-Border Arrangements