Mandatory Disclosure Regime (MDR)
The EU introduced a directive on mandatory disclosure rules aimed at increasing transparency to detect potentially aggressive cross-border tax planning. We can work with you to identify and manage cross-border reporting obligations by leveraging our global network and up-to-date tools.
What EY can do for you
The European Union (EU) Mandatory Disclosure Regime (MDR) will lead to extensive reporting obligations for a relatively wide range of tax arrangements, and there are no minimum threshold exceptions. Taxpayers and intermediaries must implement policies, procedures and processes to identify and capture details of transactions that they will need to disclose. On complex arrangements, taxpayers will need consult with their advisors. Penalties can be significant.
EY teams across the world can help taxpayers and intermediaries identify and manage their obligations under the MDR by:
- Conducting strategy sessions to discuss and identify the impact of the MDR on their European and global tax strategy
- Assisting 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
- Conducting MDR workshops for the executive-layer teams (e.g., tax, M&A, internal compliance, transfer pricing, HR and law)
- Providing MDR training programs to operational teams
- Offering advice on how to evaluate a particular transaction that you are undertaking
Also, MDR Web — the EY cross-border assessment tool, described in the video above — is designed to evaluate, log and report cross-border arrangements. Through it, you can also access our technical guidance on the interpretation of Directive on Administrative Cooperation 6 (DAC 6) and country legislation.
Start your discussion on MDR compliance today — and, through careful planning, position yourself for readiness on Day One.
To increase fiscal transparency across the EU, the DAC 6 entered into force on 25 June 2018, requiring intermediaries — such as EU-based tax consultants, banks and lawyers — to report cross-border transactions and tax arrangements that the EU considers potentially aggressive, featuring certain hallmarks (such as deductible payments exempt of taxation at recipient level). If there are no intermediaries that can report, the obligation will shift to the taxpayers.
Under the MDR, cross-border arrangements where the first step is taken after 25 June 2018 and before 1 July 2020 must be reported no later than 31 August 2020, and Member States will automatically exchange this information. After 1 July 2020, intermediaries and taxpayers will be required to report within 30 days of a triggering event in respect of any tax arrangements.
Member States must adopt and publish domestic legislation to comply with DAC 6 by 31 December 2019. Some Member States may require earlier reporting and extend the scope of domestic legislation beyond the requirements of the Directive — for instance, to cover VAT, domestic arrangements or introduce additional hallmarks.
Challenges for taxpayers
Taxpayers undertaking activities in the EU covered by the Directive will have an obligation to disclose in situations where:
- Their advisors are located outside the EU or
- All their advisors are exempt from disclosing because of legal professional privilege, or
- They managed the arrangement in house
The taxpayer 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 imposed by the MDR 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 consistent reporting.
The EU Member States have until 31 December 2019 to implement DAC 6. Current indications are that certain countries will or have extended their legislation to widen the scope to cover VAT, domestic arrangements, other hallmarks or bring the timing of reporting forward. It is worth noting that the additional information beyond the scope of the minimum standards as set out by DAC 6 should not be subject to exchange between Member States. Clients will need to keep abreast of country developments to meet local reporting requirements as some countries have chosen to apply significant penalties for non-compliance.
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.
Alerts about MDR
Are you staying up-to-date on timely analysis related to MDR? Check out the latest developments and country-specific updates.
- Czech Government publishes revised draft legislation on Mandatory Disclosure Rules: A detailed review (5 September 2019)
- Luxembourg submits draft law implementing EU Mandatory Disclosure regime to Parliament (21 August 2019)
- United Kingdom publishes draft proposal on Mandatory Disclosure Rules (19 August 2019)
- Hungary passes act to implement Mandatory Disclosure Rules (16 August 2019)
- Luxembourg Government submits draft law implementing Mandatory Disclosure Rules to Parliament (13 August 2019)
- EU Mandatory Disclosure Rules – An update on local country implementation status and trends (8 August 2019)
- Lithuanian President signs primary legislation on implementation of Mandatory Disclosure Rules (5 August 2019)
- The Netherlands publishes draft proposal on Mandatory Disclosure Rules (26 July 2019)
- UK publishes draft legislation and consultation paper on EU Mandatory Disclosure Regime (24 July 2019)
- Slovenia passes Act amending the Tax Procedure Act to implement Mandatory Disclosure Rules (17 July 2019)
- Netherlands issues draft mandatory disclosure regime legislation (17 July 2019)
- Denmark publishes draft proposal on Mandatory Disclosure Rules (10 July 2019)
- Slovakia passes draft legislation to implement EU Mandatory Disclosure Rules (8 July 2019)
- Spain publishes draft proposal on Mandatory Disclosure Rules (28 June 2019)
- Spain issues draft mandatory disclosure regime legislation (21 June 2019)
- Portugal publishes draft proposal on MDR (29 May 2019)
- Czech Republic publishes draft proposal on MDR (17 Apr 2019)
- Poland publishes official tax guidelines on the Mandatory Disclosure Rules (2 Apr 2019)
- Cyprus publishes draft Mandatory Disclosure Rules (28 Mar 2019)
- Germany publishes draft Mandatory Disclosure Rules (20 Mar 2019)
- The Netherlands publishes draft Mandatory Disclosure Rules (31 Jan 2019)
- Swedish Tax Committee proposes Mandatory Disclosure Regime (21 Jan 2019)
- Poland passes 2019 tax reform including MDR (1 Nov 2018)
- EU: Outcomes of the September meeting of EU Member States and the EC regarding Mandatory Disclosure (31 Oct 2018)
- Poland to implement MDR Rules as at 1 January 2019 (9 Oct 2018)
- European Commission paper offers guidance on hallmarks (10 July 2018)
- EU publishes Directive on new mandatory transparency rules for intermediaries and taxpayers (05 June 2018)
- EU Council adopts Directive on new mandatory transparency rules for intermediaries and taxpayers (29 May 2018)
- Council of the EU reaches an agreement on new mandatory transparency rules for intermediaries and taxpayers (14 Mar 2018)
- European Commission proposes new transparency rules for intermediaries (23 June 2017)
- OECD releases final report on mandatory disclosure rules under Action 12 (15 Oct 2015)
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