Those who are professionally dedicated to tax advice, consultancy and so on are aware of Council Directive 2018/822 of 25 May 2018, amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements, well-known as “DAC6”. All of us who are dedicated to tax advice are not only aware of this norm, but we also expect that this norm will inevitably become part of our internal legislation, sooner rather than later. The transposition of the DAC6 will introduce a series of tax policy changes of great importance, especially for those EU Countries that are not used to models of cooperative relations with the Tax Administration. This post aims to introduce the main changes to come in Spanish Taxation Policy.
The normative discrepancy
DAC6 is conceived to mandatorily disclose relevant information for tax purposes related to cross-border mechanisms presenting a series of “hallmarks”. However, the number of “hallmarks” and the amplitude (or lack of clarity) of them have created much uncertainty about how they will be transposed in each and every member State. On top of that, the possibility to expand mandatory disclosure for domestic Tax Planning schemes echoes in Spain, as it happened in Poland. The Slavic country implemented a tax reform on November 2018 which, among other measures, extended mandatory disclosure mechanisms beyond cross-border operations, including certain domestic aggressive tax planning mechanisms.
Each State is free to transpose DAC6 and to expand its basic concepts; this is why it is a Directive and not a Regulation. However, what would happen if there is a discrepancy in the definition and scope of each Member State’s interpretations? What if, in addition, an intermediary has to report on internal operations related to the main cross-border transaction? The potential desynchronization among Member States when adapting DAC6 increases compliance risks for companies operating in the EU, since several intermediaries will surely have to disclose relevant information that has not been disclosed in other involved Member States. So, there is no doubt that, for intermediaries, tax planning will become a risky sport!
The potential discrimination between intermediaries
It is necessary to remember that DAC6 has its roots in BEPS Action 12, whose main objective is to comply with the Common Reporting Standard, and also to discourage tax advisors and other intermediaries from promoting certain tax planning schemes. Moreover, the OECD points out that both the intermediaries and the structures and mechanisms subject to communication are probably at a greater risk from the point of view of compliance policy. Thus, the OECD itself highlights the actual intermediary as one of the main sources of risk.
In Spain, as there is no official regulation of the profession of tax advisor, professionals coming from different education grounds can become tax advisors without any special requirements or without passing any special exams. However, as there is a lack of regulation, they are not covered by professional secrecy — unlike lawyers —when disclosing information. Tax Advisors can be in a clear disadvantage, having to report operations and mechanisms that lawyers, under professional secrecy, may leave undisclosed. Faced with this situation, it is worth asking if DAC6 will cause the necessary regulation of the profession of tax advisory and, in turn, if the “category” of the intermediary participating in the elaboration, planning, execution of certain operations, will entail a compliance risk, based on the level of professional secrecy.
Towards a tax Relationship based on Cooperation
The role and responsibility of the intermediary before such complex regulations requires a profound change in the understanding of the interaction between the tax authorities, intermediates and taxpayers, and in that sense Spain is working on it.
As a matter of fact, the Spanish General Tax Office (Dirección General de Tributos) is working on a Code of Good Tax Practices for taxation professionals (or intermediaries in the language of the “DAC6”) in order to improve the cooperative relationship between intermediaries and the Tax Administration. Tax Authorities aim to improve legal certainty, mutual agreement and trust among parties. There is a clear will to implement a cooperation system beyond the one implemented for large taxpayers (mainly listed companies) known as the Forum for Large Companies (Foro de Grandes Empresas), and to make it accessible for smaller companies. Nonetheless, this new scenario should also include changes in the sanctioning system, since companies striving to fulfil all information disclosure obligations cannot receive the same treatment as those who do not show any will to cooperate. However, as the saying goes: Haste makes waste! Mandatory disclosure should come first!
The UNE 19602: Tax Compliance Standards
Parallel to the adaptation of DAC6 to the Spanish domestic system and the development of a Code of Good Tax Practices for Taxation Professionals, the Spanish Association of Normalization (Asociación Española de Normalización) (UNE) is working on a series of domestic recommendations and guidelines, like the ISO standards, specific for tax compliance practices. This new standard is called UNE 19602 and it seeks to be a complement for the existing Code of Good Tax Practices (already amended in 2016) — for those companies willing to join the Forum of Large Companies —, as well as to set internal and supranational regulations in order to improve compliance policies. However, UNE 19602 is thought of as a tax compliance standard for all corporate taxpayers, large and small.
The need to elaborate tax compliance plans in order to analyse taxation risks, despite them not being mandatory for the vast majority of companies, will be highly recommended. Having a UNE 19602 certification will at least show the will to be compliant in the field of taxation, the increasing complexity of which — especially regarding the requirements of the DAC6 — is worth a careful analysis. Such certification will confirm the degree of quality and good governance of a company, not only in front of the tax authorities but also in front of third parties.
The Spanish Tax Revolution towards a Cooperative Compliance Model is about to start: it will begin with DAC6 and the role of Intermediaries, and it will continue with the quality standard of UNE 19602.