The EU consistently struggles with aggressive tax planning

At the beginning of July, a new reporting obligation related to the international tax planning will come into force, covering arrangements made by both companies and individuals. The new DAC6 EU directive imposes an obligation to inform the Tax Administration even of the potential cross-border schemes or transactions with characteristics of tax avoidance. The reporting obligation concerns arrangements which cover more than one country (one or more of which is an EU country) and which have at least one of the characteristics of tax avoidance. Such kind of characteristics known as hallmarks included in DAC6 may be the following:

• acquisition of a loss-making company and discontinuance of main activity of such company, using its losses in order to reduce tax liability;
• converting income into capital, gifts or other categories of revenue which are taxed at a lower level or exempted from tax;
• cross-border payments between two or more associated enterprises made to recipients in low-tax or zero tax jurisdictions;
• all categories of hallmarks can be found from COUNCIL DIRECTIVE (EU) 2018/822

The obligation to notify cross-border tax planning arrangements to the tax authority is primarily the responsibility of intermediaries (tax consultants, banks, financial operators, lawyers, accountants, insurance companies) and in some situation, taxpayers.

The directive is aimed to struggle against aggressive tax planning schemes by informing local tax administrations about it and the subsequent automatic exchange of information about such schemes within the EU. The main aim is to increase transparency in taxation and to prevent tax evasion and aggressive tax planning.

The European Union's DAC6 Directive has entered into force on 25 June 2018 and the notification obligation has to be applied to arrangements made in the European Union after that date. Starting from 1 July 2020, information about arrangement must be reported within 30 days after it has been made available for implementation, it is ready to implemented, or its first phase has been implemented.

The arrangements implemented during the transitional period 25 June 2018 to 30 June 2020 must be notified to the Tax Administration no later than 31 August 2020. The report has to be filed in the ilmoitin.fi service. The Finnish Tax Administration published detailed guidance and instructions for providing these reports.

The Directive DAC6 applies to all direct taxes (income tax) and does not apply to value added tax, customs duties, excise taxes, and compulsory social security contributions.

If an intermediary or relevant taxpayer failure to report, make incomplete or late notification, penalty may be levied.

The full information can be found at Finnish Tax Administration website.