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Tax
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Category D Specific hallmarks for automatic exchange of information and beneficial ownership – no MBT consideration Arrangements which have the effect of undermining reporting requirements such as by reclassifying products into other types of income not reportable under automatic exchange of information rules or by transferring assets out to jurisdictions that are not bound by the same rules. Setting up structures that obscure the actual ultimate beneficial owner by use of blacklisted jurisdictions.
Category E Transfer pricing – no MBT consideration Examples might be the use of transfer pricing safe harbour rules or transfer of hard to value intangibles where there is no reliable comparable data.
Main benefit test
The main benefit test will be met if it can be established that the main benefit (or one of the main benefits) will be that the arrangement will reasonably mean that a person could obtain a tax advantage. However, the presence of certain conditions (such as the recipient being in a jurisdiction that doesn’t impose corporate tax or at a very low rate, the payment benefitting from a full exemption from tax or from a preferential regime in the other jurisdiction) doesn’t in itself mean that the main benefits test is satisfied.
Conclusion
As can be seen from the examples, the directive’s scope is necessarily wide, and the hallmarks are vague, which can make it difficult for taxpayers and intermediaries to know whether to report. Indeed, it is possible that a taxpayer may accidentally fall into this reporting regime by following a tax
strategy which includes one or more of the hallmarks discussed which, despite the main benefit test, means they will be required to report. It is important to note that DAC6 applies retrospectively and applies to all cross-border arrangements between 25 June 2018 and 1 July 2020, with reporting starting on 1 July 2020.
This article summarises the key points. It is intended to provide a general guide to the subject matter and is in a condensed form. It should not be regarded as a basis for ascertaining the liability to tax or report in specific circumstances. Seeking professional advice is recommended.
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