Reportable cross-border tax planning arrangement
21 September 2020
At the beginning of 2020, the Act on the Reporting Obligation for Cross-Border Tax Planning Structures entered into force. The Act is based on the European Union's DAC6 Directive concerning cross-border arrangements, which entered into force on 25 June 2018. The aim of the DAC6 Directive is to increase transparency in taxation and deter aggressive tax planning.
Primarily the reporting obligation concerns so-called service providers who participate in planning, marketing or implementing an arrangement. Service providers may be, for example, tax consultants and attorneys, financial sector operators and parent companies of groups.
When an arrangement does not involve a service provider with a reporting obligation, or the service provider has the right to a waiver due to legal professional privilege, taxpayers are obliged to report arrangements.
What is a reportable arrangement?
The reporting obligation applies to tax planning structures in which the parties to an arrangement are from more than one Member State and the arrangement includes at least one of the distinguishing hallmarks defined in the Act. Distinguishing hallmarks are attributes or characteristics that indicates tax avoidance.
Some of the hallmarks are also subject to the main benefit test. The test determines if the main purpose or one of the main purposes of the arrangement is obtaining a tax advantage.
What information must be reported?
Information to be reported to the Finnish Tax Administration consists of the identification details of the persons and companies involved in the arrangement and information on the reportable arrangement, such as a description of the arrangement and the national provisions of which it takes advantage.
Finland exchanges reportable information with the other EU Member States on the basis of the DAC6 Directive. The exchange of information enhances tax control and makes tax evasion more difficult.
When should the report be submitted?
The reporting obligation concerns arrangements implemented as of the entry into force of the DAC6 Directive on 25 June 2018.
- Arrangements implemented between 25 June 2018 and 30 June 2020 were to be reported no later than 31 August 2020.
- As of 1 July 2020, reports must be submitted within 30 days of an arrangement exceeding the reporting threshold.
Companies submit reports electronically through the ilmoitin.fi service. Failure to report may result in a failure fee.
All our expertise is available to you
We assist companies in analyzing the reportability of arrangements and in fulfilling the reporting obligation in Finland. Our international network supports the fulfillment of obligations in other EU Member States.
BDO Global Tax team has developed an analysis tool to analyze the reportability of arrangements and to generate reports for documentation and compliance in various EU Member States. The analysis tool is an excellent tool for the company to manage and fulfill the new reporting obligation.