Directive on Administrative Cooperation (DAC)

Taxation and its interaction with our markets is an important area of focus for ISLA. Through specialist working groups, we respond to tax authorities on emerging tax areas such as the Directive on Administrative Cooperation (DAC).

Through DAC6, the European Union (EU) is introducing an additional level of transparency in order to detect potentially aggressive tax arrangements. The amendment to an earlier directive on mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (DAC6), will have far-reaching consequences for tax advisors, service providers, and taxpayers, including securities lending market participants.

DAC6 imposes mandatory disclosure requirements for certain arrangements with an EU cross-border element, where the arrangements fall within certain “hallmarks” mentioned in the directive, and in certain instances where the main or expected benefit of the arrangement is a tax advantage. There will be a mandatory automatic exchange of information on such reportable cross-border schemes via the Common Communication Network (CCN) which will be set up by the EU.

Although the directive is not effective until 1 July 2020, taxpayers and intermediaries need to monitor their cross-border arrangements on a retrospective basis from June 2018.