Austria's implementation of the DAC 6-directive: The EU Reporting Act
Following the approval on 25 May 2018 of the European DAC 6-directive, which obligates taxpayers and tax intermediaries to report certain aggressive cross-border arrangements to the tax authorities, the Austrian parliament approved the EU Reporting Act (EU-Meldepflichtgesetz) on 20 September 2019, which implements the aforementioned directive into Austrian domestic law. This publication will highlight the most important takeaways and developments of this new act in comparison to the directive, which was already discussed in Roadmap 2018.
The DAC 6-directive defines a reportable cross-border arrangement as a cross-border arrangement that contains at least one of the hallmarks as set out in the annex to the directive. Most of these hallmarks will only be considered if it can be established that obtaining a tax advantage, which the taxpayer may reasonably expect, is the main purpose or one of the main purposes of the cross-border arrangement. The Austrian implementation deviates from the directive. Firstly, the wording of what constitutes a "reportable cross-border arrangement" differs slightly; the directive considers "a tax advantage as one of the main purposes", the Austrian act addresses the "risk of tax avoidance" as reportable cross-border arrangement. Secondly, the implementing act not only considers tax avoidance, but also arrangements which aim to circumvent certain reporting obligations or the identification of the beneficial owner. We believe that this wording is based upon and refers to the general anti-tax avoidance provision in the Federal Tax Code (Bundesabgabenordnung).
The DAC 6-directive gave Member States the option to exempt intermediaries who are bound by legal professional privilege. The Austrian parliament has decided to do so. Therefore, attorneys, tax advisors, notaries and public accountants are all exempt from reporting such aggressive cross-border arrangements, except when (i) their client has released them from this secrecy or when (ii) such intermediary does not operate within the limits of the statutory provisions which define its profession. These intermediaries must notify their client and any other intermediary involved in the cross-border arrangement in the case of an exemption.
From 1 July 2020, intermediaries – or the taxpayers themselves – must comply with these reporting obligations for newly set-up arrangements. Additionally, reportable arrangements of which the first step in implementing such arrangements was taken between 25 May 2018 and 30 June 2020 will have to be reported by 30 August 2020.
Non-observance by the taxpayer or the intermediary of their reporting obligations is classified as a breach of financial regulations and will be fined EUR 25,000 in the case of gross negligence or EUR 50,000 in the case of intentional non-compliance.