DAC6

What it means

DAC6 is the sixth amendment to the EU directive on administrative cooperation in taxation. It requires cross-border arrangements that show at least one of the statutory hallmarks of potentially aggressive tax planning to be reported to the tax authorities. EU states then exchange the data automatically.

Hallmarks include an adviser’s fee that depends on the tax saving achieved, a standardised scheme sold to many clients, buying a loss-making company to use its losses, payments to zero-tax countries, transfers of hard-to-value intangibles and structures that obscure the beneficial owner.

The primary duty to report lies with the intermediary, meaning the adviser, lawyer or bank that designed the arrangement or helped implement it. If it is bound by professional privilege or is outside the EU, the duty passes to the taxpayer. The deadline is generally 30 days from when the arrangement is made available or starts being implemented.

How it works in practice

Ordinary cross-border business, such as selling goods or services to a customer in Germany, is not reportable. What matters are mainly intra-group transactions, restructurings, transfers of intangibles, loans and licences with related parties, and structures involving low-tax countries.

For clients with foreign ties we therefore assess, at every significant change of structure, whether a reporting duty arises, and document the conclusion. Reports are filed electronically with the Financial Administration, and a report does not in itself mean the arrangement is unlawful.

DAC6 complements substantive rules such as ATAD, CFC rules and transfer pricing. While those determine how much tax is due, DAC6 ensures the tax authorities even know about structures that deserve a closer look.

What to watch out for

The most common mistake is assuming only the adviser has the duty. If the adviser does not report, for example citing privilege, or if the company designed the structure itself, the duty stays with the taxpayer, and failing to meet it risks a penalty.

The second risk is missing the deadline. The 30 days run from when the arrangement is ready for implementation or implementation begins, not from year-end. For transactions that close quickly it is wise to have a DAC6 assessment on the checklist before signing.