New Transparency Rules for Tax Advise Intermediaries: New transparency rules have been proposed by the European Union concerning intermediaries who provide tax advisory services to their clients including design and promotion of tax planning.The scope of those rules covers intermediaries such as business consultants, tax advisers, legal consultants/lawyers, financial institutions such as banks and accountants.
New Transparency Rules for Tax Advise Intermediaries: Scope and purpose of rules
These persons/firms will be under the obligation to report the relevant arrangements prior to their use with the aim is to provide more information to EU member states on the tax planning schemes that intermediaries design and market.The reason is to be able to assess whether the schemes are designed to facilitate tax avoidance and evasion with the hope of intermediaries reducing such practices since schemes are likely to be blocked if they are designed to facilitate tax avoidance and evasion. The proposal covers all intermediaries and all types of direct taxes and the obligation to report a scheme which bears one or more of the following characteristics shall bind:
- Those who supply such tax scheme for implementation
- The individual or company receiving such tax advice in cases where the intermediary is located outside the EU, or where bound by professional privilege or secrecy rules;
- The individual or company implementing the scheme when it has been developed and provided by in house professionals.
In order for the Commission to operate effectively in this respect it has identified some key characteristics of those cross-border tax planning schemes which among others include the following:
- cross-border payment to a recipient residing in a tax-free country;
- jurisdiction involved with insufficient anti-money laundering legislation;
- arrangements to avoid reporting income as required under EU transparency rules;
- EU information exchange requirements for tax rulings which are circumvent:
- Link between intermediary fees with taxpayer’s savings from tax avoidance arising from the set up provided by the intermediary;
Automatic Exchange of information
EU member states will be required to automatically exchange the information they receive from intermediaries through a centralized database which shall include details on the intermediary, the taxpayer involved as well as the features of the tax scheme.There will be sanctions for those intermediaries that fail to comply with the law.The new reporting requirements are expected to enter into force on January 1, 2019.
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