Mandatory Disclosure Regime (MDR)

Countries are implementing mandatory disclosure rules aimed at increasing transparency to detect what is perceived by tax authorities to be potentially aggressive cross-border tax planning. We can work with you to identify and help manage cross-border reporting obligations by leveraging our global network and up-to-date tools.

What EY can do for you

MDR will lead to extensive reporting obligations for a relatively wide range of transactions being classified as reportable arrangements. No jurisdiction other than Mexico has introduced any de minimis rules. Taxpayers and intermediaries (e.g. advisors, banks etc.) must implement policies, procedures and processes to identify and capture details of transactions that they may need to disclose. Penalties can be significant.

EY teams across the world can help taxpayers and intermediaries (e.g., advisors, banks etc.) identify and manage their obligations under the MDR. 

Do you have a process to manage your MDR obligations?

  • EY teams can assist in the development of process guidelines and/or policies for MDR reporting, from the day-to-day identification of reportable arrangements up to the data submission to the tax authorities.

Why is this relevant?

  • There may be situations where you may have a reporting obligation. Penalties for incomplete or late filing can be significant.

Have you appointed a person as the process owner for MDR compliance and are the responsibilities for MDR reporting defined within your organization? Why is this relevant?

  • The responsibility for MDR compliance often starts with the Tax function. However, the responsibility for adequate processes, up-to-date MDR knowledge and timely filing may be with different parts of your organization.

Have you conducted an MDR impact assessment? If so, what was the outcome for the countries where you have a footprint?

  • It is important to identify and assess the potentially reportable transactions based on the regulations applicable. Even though EU MDR rules are based on DAC 6, there are differences in how this has been transposed and implemented across the EU member states. Argentina and Mexico each have their own set of reportable hallmarks under their own MDR.

Why is this relevant?

  • MDR may impact your internal and external processes a lot, depending on your EU footprint, legal structure and your business activities. Documenting where and to what extent MDR may impact your organization is important.

Other stakeholders may request this information (e.g., internal audit, external auditors, tax authorities, etc).

Do you have a process to understand what has been reported by your intermediaries (e.g. advisors, banks etc.)?

  • Generally, the reporting obligation lies with intermediaries. Intermediaries may only have limited information on the broader background and relevant taxpayers have to deal with any follow up questions raised by the tax authorities.

Why is this relevant?

  • In certain EU jurisdictions, you may have to annually report which MDR disclosures have been made.

Do you have a process to meet the 30-day deadline in the EU, Mexico and the UK or 10- day deadline in Argentina?

  • A delayed reporting can trigger penalties that can amount for MDR reporting failures of up to e.g. Euro 5m in the EU.

Why is this relevant?

  • The rolling 30-day deadline in practice is very short. This may make relying on your existing compliance processes risky, especially where they do not operate frequently or seamlessly enough to ensure compliance with the tight deadlines.

EY teams can assist you with the reporting of your arrangements in the format as requested by the local tax authorities.

  • EY teams have developed MDR Web, an assessment tool. 
  • It is designed to evaluate, log and report cross-border arrangements.
  • You also have access to technical guidance on each country’s MDR rules.

Why choose MDR Web

  • Includes guidance for both EU and non-EU countries as and when legislation and guidance is published by the authorities
  • Deployed in either your IT infrastructure, or on an EY hosted cloud, depending on your preference.
  • To learn more, please check our MDR Web’s functionalities and watch our video below.

MDR Web — the EY cross-border assessment tool, described in the video above — is designed to evaluate, log and report cross-border arrangements.

MDR Web functionality 

  • Access for named users (client and/or EY) to log arrangements
  • Integrated with single sign-on
  • Data input guidance (technical explanations of MDR terms) provided
  • Disclosure workflow management process
  • Essential documents can be attached and uploaded
  • Record arrangements based on legal entities to enable reporting directly from the tool
  • Guided process to evaluate whether an arrangement is reportable or not.
  • Smart/dynamic questionnaire helps minimize questions based on previous answers.
  • Detailed guidance (technical explanations of MDR legislation per country)
  • Highlights differences in countries’ interpretations to aid review pre-submission and help you understand differences in evaluation outcomes.
  • Functions as an online repository of reportable arrangements during the transition and deferral periods and beyond.
  • Dashboard for easy monitoring.
  • Creates an audit trail from logging to reporting.
  • Data is held in structured (SQL) format to support report generation based on a legal entity or country basis.
  • Supports xml reporting, building onto our extensive Global Tax Reporting Service.
  • Functionality to capture proposed disclosures by your intermediaries.
  • Challenges for taxpayers

    Taxpayers will need to take appropriate measures to put in place policies, procedures and processes to identify and capture details of transactions that they will need to disclose themselves.

    The taxpayer’s advisors will disclose using information available to them. The tight reporting deadlines may result in inconsistent reporting which may lead to unwarranted tax audits. On complex arrangements, taxpayers will need to identify and consult with their advisors to achieve coordinated and consistent reporting.

  • Challenge for intermediaries

    Certain organizations will meet the criteria to be regarded as an intermediary, for example financial institutions and other providers of tax advice. Intermediaries will need to develop systems and governance processes to report the qualifying arrangements that they have advised clients on, or assisted clients with. For example:

    • Identify entities within their organization that have reporting obligations under DAC 6 and domestic legislation.
    • Identify and understand the types of activities undertaken by their organization on behalf of clients that are likely to be covered by DAC 6 and domestic legislation.
    • Create and implement governance policy on MDR and monitor procedures for compliance.
    • Implement a system/tool to evaluate, log and report arrangements.
    • Educate stakeholders (inside and outside the tax department) and enhance awareness and compliance with EU mandatory disclosure rules.

To learn more, explore our guidance for taxpayers and intermediaries

DAC 6 updates

This newsletter and table provides insight and technical information leading up to DAC 6 implementation on 1 July 2020.

DAC6 deferral and reporting details (pdf) (last updated 9 February 2021)

DAC6 local country status and reporting trends (pdf) (May 2020)

Designing and implementing your long-term compliance program for the EU mandatory disclosure rules (MDR) (pdf) (January 2020)

Alerts about MDR

Are you staying up-to-date on timely analysis related to MDR? Check out the latest developments and country-specific updates

 

Understanding the elements of MDR compliance and how to prepare (Financial Services)

Discover more on the potential impact of MDR on your business.

Learn more

Webcast: EU DAC6 Mandatory Disclosure Regime (MDR)

Panelists discuss the latest in country developments, practical reporting considerations and navigating the COVID-19 impact.

Watch replay

Webcast: EU MDR update and practical insights

Panelists discuss what taxpayers should do to implement internal controls and procedures to manage their MDR obligations.

Watch replay

Contact us

Like what you’ve seen? Get in touch to learn more.