The European Commission has proposed a recast of the Directive on Administrative Cooperation (DAC), codifying the Directive and all its subsequent amendments into a single act. The proposal aims at solving excessive complexity, inconsistent application across Member States, and reporting obligations that generate limited value for tax administrations. The key changes are detailed below.

DAC 6 – Reportable Cross-Border Arrangements

• Pillar 2 carve-out – MNE groups within the scope of the Pillar 2 Directive (consolidated annual revenue of at least €750 million) are excluded from DAC 6 reporting, since the 15% minimum effective tax rate is deemed to neutralise aggressive tax planning. The carve-out is narrow: it applies only where no related benefit is granted to the group that would lower taxation below 15%. 
• Reportable arrangements – the definition is streamlined to cover only arrangements that are actually implementable.
• Relevant taxpayer – the definition becomes tied to the taxpayer who is starting to implement the arrangement, so the same arrangement is no longer reported multiple times by different parties.
• Removed definitions – the “marketable arrangement” and “bespoke arrangement” definitions are deleted.
• Reporting window – extended from 30 to 90 days, to allow better-quality, more complete filings and give intermediaries time to coordinate.
• Trigger for the reporting period – the 90-day clock starts only once the first step of implementation has been taken: a concrete, initial verifiable act materialising the intent to implement, which renders execution irreversible or legally binding (e.g. the signing of enabling contracts). 
• Legal professional privilege – Lawyers practising under the professional titles listed in Article 1(2)(a) of Directive 98/5/EC who invoke legal privilege must notify only their client (not other intermediaries) of the client’s reporting duty. 
• Hallmark A deleted – the generic Category A hallmarks have proven of little practical value to tax administrations while generating disproportionate reporting volumes, so they are removed.
• Hallmark C1 – the reference to “non-cooperative jurisdictions” is replaced by the list produced by the Code of Conduct Group, aligning the hallmark with the assessment Member States already make collectively.
• Hallmark D2 – the substance criteria are to be further specified in a future Council implementing act, to ensure legal certainty and consistent application across Member States.
   

DAC 7 – Digital Platform Reporting

• Sales-of-goods activity threshold removed – the previous 30-transaction test, disproportionately low, is scrapped, in order to focus on cases where a more significant tax liability is expected.
• Monetary threshold raised – increased from EUR 2,000 to EUR 3,000 per year for the same reason.
   

Country-by-Country Reporting & Pillar II

• Single notification – entities in scope of both Country-by-Country reporting and the top-up tax information return currently must notify their tax authority twice, under different rules and timelines set by each Member State. The recast allows the group to file a single notification covering both purposes.
• Aligned deadline – the notification deadline is set at the last day of the MNE group’s fiscal year, mirroring the existing CBCR deadline.
• Common template – a single notification template is to be adopted for all Member States by the Commission via an implementing act.
• Single filing point – the notification is filed with one tax authority and exchanged with all other relevant Member States within three months of the filing deadline.
   

Exchange of Information

• Digital TIN verification tool – the Commission is to provide Member States with a tool for electronic, automated verification of TIN correctness.
• Compulsory for administrations, optional for reporting entities – tax authorities must obtain electronic confirmation of TIN validity for exchanged taxpayer data, while reporting entities may choose whether to use the tool themselves.
• Lighter reporting once verified – where a TIN has been confirmed via the tool reporting entities need only report the taxpayer’s name and the (verified) TIN – no further identifying data.
• Broader access to data – the definition of “available information” is widened to cover all registers and databases held by Member States’ public authorities, not only tax authorities. Tax authorities also gain access to AML registers – notably the new interconnected real-estate register – and to pension registers.

Source: European Commission, Explanatory Memorandum – Proposal for a Council Directive recasting Directive 2011/16/EU (DAC). This newsletter is for information purposes only and does not constitute tax or legal advice. The proposal remains subject to the EU legislative process and may change before adoption.