DAC6 Transposed into Cypriot legislation
On 18 March 2021, the Cyprus Parliament voted into law (i.e. Law 4(I)/2021) the provisions of European Council Directive 2018/822 (hereinafter “DAC6”), amending the Administrative Cooperation in the Field of Taxation Law of 2012 (the “Law”).
DAC6, designed to encourage cross-border information exchange in the European Union, represents the 6th amendment of Directive 2011/16/EU (i.e. the Directive on Administrative Cooperation) and expands the provisions of the latter regarding the mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements.
The Law came into force on 31 March 2021 and has a retroactive effect which captures reportable cross-border arrangements made on or after 25 June 2018.
DAC6 requires from Intermediaries and Taxpayers (as such terms are defined in DAC6) to submit information to the Cyprus Tax Authorities (the “CTA”) relating to cross-border transactions/arrangements, which meet one of the DAC6 hallmarks (5 categories). Pursuant to the DAC6 legislation:
- A cross-border arrangement means an arrangement concerning either more than one EU Member State or an EU Member State and a third country.
- A hallmark is defined in the DAC6 as a characteristic or feature of a cross-border arrangement that presents an indication of a potential risk of tax avoidance.
As regards the reporting deadlines, the CTA announced on 26 February 2021 that there will be no imposition of administrative fines for overdue submission of DAC6 information that will be submitted until 30 June 2021 with respect to reportable cross-border arrangements that have been or will be implemented between 25 June 2018 and 31 May 2021.
Any reportable cross-border arrangements, which will be implemented on or after 1 June 2021, must be reported within 30 days from the date on which it becomes available for implementation, or it is ready for implementation or it has implemented the first step of such an arrangement (whichever occurs the earliest).
Any information on reportable cross-border arrangements has to be submitted to the CTA by uploading an XML file through the Government Gateway Ariadni Portal.
Practising lawyers are excluded from the obligation to file information to the CTA, where such information falls within the scope of “legal professional privilege” and provided that they have notified, within 10 days, any other Intermediary involved in the arrangement, or if there is no such other Intermediary, the relevant Taxpayer of their reporting obligation.
Penalties for non-compliance vary depending on the infringement, with a maximum of €20,000 per arrangement.