DAC 6: reporting risky cross-border arrangements

Quick answer. DAC 6 refers to European Directive (EU) 2018/822, transposed into French law (Articles 1649 AD to 1649 AH of the tax code). It requires reporting to the administration cross-border arrangements that present certain hallmarks of potentially aggressive tax planning. The obligation falls first on the intermediary (adviser, lawyer, bank, accountant) who designs or implements the arrangement; failing that, on the taxpayer concerned. The report is made within a 30-day deadline. Some hallmarks only apply against the main benefit test, others are autonomous. Failure to report is penalised by a fine of EUR 10,000 per breach (EUR 5,000 for a first offence), capped at EUR 100,000 per year.

The fight against aggressive tax planning and evasion has translated into a series of European reporting obligations. DAC 6 is a pillar of it, complemented by other measures such as DAC 8 on crypto-assets. For companies and their advisers operating internationally, identifying a reportable arrangement has become a compliance reflex, like the other tax filings.

DAC 6 is the sixth version of the directive on administrative cooperation in tax matters. Directive (EU) 2018/822 of 25 May 2018 introduces an automatic and mandatory exchange of information between administrations on reportable cross-border arrangements. In France, it was transposed by Ordinance no. 2019-1068 of 21 October 2019, in Articles 1649 AD to 1649 AH of the tax code.

The aim is not to prohibit, but to make visible upstream the potentially aggressive arrangements, so that administrations can react.

Two cumulative conditions trigger the obligation:

• A cross-border arrangement. An agreement, scheme or plan concerning France and at least one other State (EU member or not).
• At least one hallmark. The potentially aggressive character is assessed against "hallmarks", classified into categories. Some hallmarks only apply if the main benefit test is met (the tax advantage is one of the main expected benefits); others are autonomous (for example certain deductible cross-border payments to little- or non-taxed entities, schemes circumventing the automatic exchange of accounts, or arrangements obscuring beneficial owners).

Without a cross-border arrangement, or without a hallmark, there is no DAC 6 obligation.

The obligation falls primarily on the intermediary:

• The intermediary is the designer of the arrangement or any provider that knowingly contributed to its implementation (consulting firm, lawyer, bank, accountant).
• The discharge. An intermediary is discharged if they prove that another intermediary has already reported the arrangement in the Union. In case of professional secrecy (notably the lawyer), the obligation shifts to another intermediary or, failing that, to the taxpayer.
• The taxpayer. Absent an intermediary subject to the obligation (or in case of professional secrecy without a relay), the taxpayer concerned reports.

• The deadline. The report is in principle made within a 30-day deadline following the triggering event (making available, ready to implement, or the first step of implementation).
• The penalties. Failure to report within the required form and time is penalised by a fine of EUR 10,000 per breach, reduced to EUR 5,000 for a first offence of the current year and the three preceding years. The cumulative amount cannot exceed EUR 100,000 per year for the same intermediary or taxpayer.

Reporting an arrangement entails no acknowledgement of irregularity: DAC 6 organises transparency, it does not qualify fraud.

The group with intragroup flows. Cross-border payments between related entities and certain holding schemes may contain hallmarks: a review is needed before concluding that no report is due.

The intermediary subject to professional secrecy. The lawyer bound by secrecy does not report the protected content, but the obligation shifts: the reporting chain must be clarified between the parties.

The arrangement without a main tax benefit. For hallmarks subject to the main benefit test, the absence of a decisive tax advantage may rule out the obligation; for autonomous hallmarks, the obligation applies regardless.

• DAC 6 prohibits nothing. It requires reporting, not giving up a legitimate operation: reporting is not a confession.
• The 30-day deadline is short. Identify the arrangement and the reporter upstream, not at the last moment.
• Check who reports. Between intermediaries and taxpayer, the allocation of the obligation must be clarified in writing.
• Autonomous hallmarks apply without a main benefit. Do not rely on the main benefit test alone.
• Keep the documentation. In a check, you must be able to justify the analysis conducted, including the conclusion of no obligation.

Recently, a group asked us about an intragroup financing scheme involving two States and a lightly taxed entity. The first reaction was to consider it a routine operation, with no reporting obligation. The hallmark analysis showed the opposite: an autonomous hallmark on cross-border payments applied, regardless of any main tax benefit. We organised the report within the 30-day deadline and clarified, in writing, the allocation of the obligation between the intermediaries and the taxpayer.

Our conviction, as accountants registered with the Ordre, is that DAC 6 should neither be ignored nor over-interpreted. Not all cross-border operations are reportable, but some are unexpectedly so, because of autonomous hallmarks. The good practice is a systematic, documented upstream review, concluding either to report or to a justified absence of obligation. It is compliance work we carry out with the client's legal counsel and tax adviser.

Hayot Expertise advice. For any operation involving several States, ask yourself two questions: is it a cross-border arrangement, and does it contain a hallmark? If so, immediately determine who reports (intermediary or taxpayer) and meet the 30-day deadline. Remember that some hallmarks apply without a tax-benefit condition. And document your analysis, even when it concludes there is no obligation: it is your best protection in a check. Reporting is not denouncing yourself; it is complying.