Personal scope of application As per 26 June 2022

Are there any deviations from the Directive in defining the intermediary?

2021/06/17

In principle, the German definition is very close to the Directive. However the auxiliary intermediary, respectively any person who knows or could be reasonably expected to know that they have undertaken to provide aid, assistance or advice with respect to certain actions regarding the reportable cross-border arrangement, is not explicitly included in the German law. In so far, the German definition is more narrow.

How is an intermediary defined? Is there a differentiation between a corporate entity and an individual person?

2021/06/17

In principle, the legal definition does not contain any restrictions in terms of legal form. This means that both natural and legal persons can act as intermediaries. Accordingly, the tax advisor who, in their own names, performing one of the respective activities is to be considered as an intermediary. However, anyone who, as an employee of a tax advisor (salaried employee), performs such activities is not an intermediary.

Can a corporate tax department (or its members) within a MNE or within a group of entities qualify as an intermediary?

2021/06/17

If a relevant taxpayer has designed the cross-border arrangement for him-/herself (in-house arrangement), the provisions applicable to intermediaries, in particular sec. 138f FC, apply to him accordingly in accordance with sec. 138d para. 6 FC.

How are the actions of designing, marketing, organizing, making available for implementation or managing the implementation of a tax arrangement defined?

2021/06/17

Design - implemented as conceptualization for third parties ("für Dritte konzipieren"): This action is described as planning, designing or developing a specific tax structure in relation to a specific user or a group of users. This does not include the mere assessment of a tax concept planned, designed or developed by the user or a third party. Marketing - implemented as Marketing ("Vermarkten"): An arrangement is marketed as soon as it is brought onto the market and is offered to third parties. Associated enterprises are not considered to be third parties within the scope of "marketing". Organizing - implemented as Organizing for third parties ("für Dritte organisieren"): This action includes the systematic preparation and planning of an arrangement, making available for implementation and making available for a certain use. Making available for implementation - implemented as Making available for use for third parties ("für Dritte zur Nutzung bereitstellen"): This describes the moment, when the intermediary provides information required for the implementation of an arrangement or (contractual) documents to a potential user or otherwise makes them individually accessible to the latter one. An actual implementation of the tax planning by the user is not required. However, there must be a recognisable intention of the user to implement the cross-border arrangement individually presented to him. Such an intention can be assumed in particular as soon as the contractual documents relating to the individual case have been handed over to the user or otherwise made available. Furthermore, the user must to be objectively capable of implementing the cross-border arrangement based on the documents made available to him/her. The provision of merely general information on an arrangement, e.g. by publishing non-binding information on the Internet or by public display or the issue of generally accessible prospectuses, does not yet constitute "making available for use". Managing the implementation - implemented as Administration of the implementation by third parties ("Umsetzung durch Dritte verwalten"): This covers the responsible management of the certain implementation of the arrangement.

Have the legal preconditions regarding the territorial nexus for an intermediary been implemented in accordance with the Directive?

2021/06/17

In deviation from the Directive, a person who is tax resident only in another Member State than Germany cannot qualify as an intermediary in Germany. In contrast, only persons fulfilling the nexus to Germany or a third-country can be intermediary obliged to report in Germany. Accordingly, a person who is tax resident in Germany can qualify as an intermediary. Besides, a person who is tax resident in a third-country can qualify as an intermediary in Germany if at least one of the following additional conditions is met: (a) have a permanent establishment in Germany through which the services with respect to the arrangement are provided; (b) are entered in the commercial register or a public professional register; (c) are registered with a professional association for legal, tax or advisory services.

Are there any other conditions apart from those of the Directive, such as the territorial nexus of a tax arrangement to a certain Member State, which trigger a reporting obligation of an intermediary (e.g. including intermediaries from outside the EU)?

2021/06/17

There are no other conditions apart from those of the Directive.

In which cases is the relevant taxpayer obliged to report? Are there deviations from the Directive?

2021/06/17

The user is obliged to report in three cases: (1) If no intermediary exists. (2) If there is no intermediary with a territorial nexus to Germany. (3) If the intermediary is subject to a legal professional secrecy and the user has not released the intermediary from his obligation of secrecy. In this case the intermediary must report general data on the tax regime, while the user must report user-related data in a second step. In this case, the user also has the option of submitting the full report on behalf of the intermediary.

Are there any other persons beside intermediaries or relevant taxpayers obliged to report?

2021/06/17

There are no other persons beside intermediaries and users obliged to report.

Are there any deviations from the Directive in defining the relevant taxpayer?

Mechanism to avoid multiple reporting

Which measures have been taken to avoid multiple reporting obligations referring to an intermediary obliged to report in several countries? Are there deviations from the Directive?

2021/06/17

The intermediary shall be exempt from filing the information if there is proof, in accordance with domestic law, that the report has been filed in another Member State. In Germany, this proof can be adduced by reference to the registration number and the disclosure number issued by the Member State, in which the cross-border arrangement has been reported before. If an intermediary is obliged to report in Germany and in at least another Member State, the intermediary, in deviation from the Directive, is free to choose the country, where the report is to be filed. There is no rule giving priority to a certain state with respect to where to file the report.

Which measures have been taken to avoid multiple reporting obligations referring to more than one intermediary obliged to report? Are there deviations from the Directive?

2021/06/17

In principle, several intermediaries of the same arrangement are individually obliged to report the arrangement. An intermediary shall be exempt from filing the information only to the extent that there is proof, in accordance with domestic law, that the same information has already been filed by another intermediary. The proof can be adduced by reference to the registration number and the disclosure number issued by the Member state, in which the cross-border arrangement has been reported before. In principle, the obliged intermediaries are free to choose the intermediary (and by that choice the country), who will file the report.

Which measures have been taken to avoid multiple reporting obligations referring to a relevant taxpayer obliged to report several countries? Are there deviations from the Directive?

2021/06/17

The user shall be exempt from filing the report, if there is proof that the same information has been filed in another Member State. In Germany, this proof can be adduced by reference to the registration number and the disclosure number issued by the Member State, in which the cross-border arrangement has been reported before. If the user is obliged to report in Germany and at least another Member State the user, in deviation from the Directive, is free to choose the country, where the report is to be filed. There is no rule giving priority to a certain state with respect to where to file the report.

Which measures have been taken to avoid multiple reporting obligations referring to more than one relevant taxpayer obliged to report? Are there deviations from the Directive?

2021/06/17

In deviation from the Directive, the user who agreed upon the cross-border arrangement with the intermediary has to file a report with general information about the cross-border arrangement primarily. Subsequently, the user who manages the cross-border arrangement is supposed to report this information. As another deviation from the Directive, all users are equally obliged to report user-related information about themselves. However, if the user obliged to report general information about the cross-border arrangementadditionally reports user-related data about other users, those remaining users are exempt from filing a report.

How does the National Tax Authority expect the conditions for exemption from filing a report to be met?

2021/06/17

In Germany the proof, that another intermediary/user has filed the report or the same intermediary/user has filed the report in another Member State can be adduced by reference to the registration number and the disclosure number of the Member State, in which the tax arrangement has been reported before. These numbers do not have to be reported to the tax authorities but it is sufficient to be able to provide the information on request during a tax audit.

Material scope of application

Are national tax arrangements subject to reporting under the Directive?

2021/06/17

National cross-border arrangements are not subject to report. Currently, an introduction of Mandatory Disclosure Rules (MDR) for the national cross-border arrangements is discussed by political institutions.

Which taxes are affected? Are there deviations from the Directive?

2021/06/17

All taxes are affected which are subject to the Law on European Administrative Cooperation. VAT as well as other harmonized customs duties and excise duties are not affected according to the German implementation.

Does the hallmark catalogue deviate from the Directive? If yes, to what extent?

2021/06/17

The hallmark catalogue does, in principle, not deviate from the Directive. However, the catalogue is structured in a different way. First, the hallmarks in connection with the main benefit test are listed, then hallmarks which directly trigger the reporting obligation are enumerated.

Which hallmarks are linked with the main benefit test?

2021/06/17

The same hallmarks from the Directive are linked with the main benefit test. Those are hallmarks referring to: - Confidentiality clause; - performance-related remuneration; - standardized Arrangement; - artificial acquisition of a loss-making company; - conversion of income; - circular transactions; - cross-border payments are not taxed or taxed preferentially at the level of recipient.

How is the main benefit test defined?

2021/06/17

The main benefit test is fulfilled if with regard to all relevant facts and circumstances a knowledgeable person (third party) can reasonably expect the main benefit or one of the main benefits of the arrangement to be the obtaining of a tax advantage in the sense of sec. 138d para. 3 FC.

How is a tax advantage defined?

2021/06/17

A tax advantage is given, if: - taxes shall be refunded, tax reimbursement shall be granted or increased or tax claims shall cease to exist or to be reduced as a result of the arrangement; - the accrual of tax claims shall be prevented; or - the accrual of tax claims shall be postponed to other taxation periods or times. A tax advantage which arises abroad, is considered to be reportable. It is irrelevant whether the tax advantage that is to be expected by the cross-border arrangement ultimately materialises. The BMF is authorized to publish a so-called "white list" for certain groups of cases in which no tax advantage is to be assumed, in particular because a tax advantage only affects the scope of German legislation and is explicitly provided for in the law (sec. 138d para. 3 sentence 2 FC). With the draft letter by the Federal Ministry of Finance (FMoF), dated 2 March 2020, the FMoF published a legal statement containing the so-called "white list". At present, this white list covers only very few issues, which mainly originate from the area of inheritance and gift tax, such as donations using the tax-free allowances.

Are there any deviations from the Directive in defining a cross-border arrangement?

Is there a white list defining arrangements explicitly excluded from a reporting obligation? If yes, please provide details.

Are there any deviations from the Directive in defining associated enterprises?

Reporting process

When is a cross border arrangement made available for implementation (e.g. handover of contract documents)?

2021/06/17

A cross-border arrangement is made available for implementation, when the intermediary has handed over the necessary information or the (contractual) documents to the user or made them accessible in another way.

When is a cross-border arrangement ready for implementation?

2021/06/17

The willingness to implement a cross-border arrangement is given as soon as the actual implementation of the arrangement depends only on the final decision of the user. Sec. 138d para. 5 no. 2 FC shall particularly apply if the arrangement has been designed by the user himself, i.e. without the participation of an intermediary (in-house arrangement) and therefore no documents have to be provided for implementation. In companies, the point in time at which the responsible person decides to implement the arrangement is to be taken into account.

When has the first step in the implementation of a cross-border arrangement been made?

2021/06/17

This is the case, for example, if there is a contract whose effect is made dependent on a condition (suspensive condition within the meaning of sec. 158 BGB - German civil code). In this case, a person is a user within the meaning of sec. 138d para. 5 no. 3 FC as soon as he or she makes the first step towards implementing the cross-border arrangement.

Which information should be included in the report? Are there deviations from the Directive?

2021/06/17

There are no deviations from the Directive. The report should include the following information: no. 1 : information about the intermediary, including the name, date and place of birth (for individuals) or company name (for legal persons), address, residence for tax purposes, TIN; no. 2: information about the user: name, date and place of birth (for individuals) or company name (for legal persons), address, residence for tax purposes, TIN; no. 3: information about associated enterprises: name (for individuals) or company name (for legal persons), address, residence for tax purposes, TIN; no. 4 :details of the hallmarks; no. 5: a summary of the content of the reportable cross-border arrangement, including a reference to the name by which it is commonly known, if any, and a description in abstract terms of the relevant business activities or arrangements, without leading to the disclosure of a commercial, industrial or professional secret or of a commercial process, or of information the disclosure of which would be contrary to public policy; no. 6: the date on which the first step in implementing the reportable cross-border arrangement has been made or will be made; no. 7: details of the national provisions that form the basis of the reportable cross-border arrangement; no. 8: the actual or foreseeable value of the reportable cross-border arrangement; no. 9: the identification of the Member State of the relevant taxpayer(s) and any other Member States which are likely to be concerned by the reportable cross-border arrangement; no. 10: the identification of any other person in a Member State likely to be affected by the reportable cross-border arrangement, indicating to which Member States such person is linked.

What does the reporting process look like? Are there deviations from the Directive?

2021/06/17

In general, the intermediary has to file the whole report. After filing the report, the intermediary receives a registration and disclosure number by the tax authority which are to be forwarded to the users and to other intermediaries mentioned in the report. In order to do so, an intermediary who is subject to a legal professional privilege needs to be released from his/her confidentiality obligation by the corresponding user. If the user does not release the intermediary, in deviation from the Directive, the intermediary must report the general data about the arrangement (including intermediary-related data but not user-related data) in a primary report. Then, the intermediary must forward the registration and disclosure numbers to the user. Subsequently, the user must file a second report including his/her own user-related data. There is also the possibility, that the user, who has not released the intermediary from the confidentiality obligation, files the complete report in behalf of the intermediary. Furthermore, in deviation from the Directive, the user needs to indicate the registration and disclosure numbers in the corresponding tax return in the period in which the tax advantage shall materialise for the first time.

Is the entire report to be provided by the intermediary/relevant taxpayer? Who must provide the report?

2021/06/17

In principle, the intermediary as well as the user are obliged to provide the entire report. In deviation from the Directive, the reporting process is subdivided in two stages, in case that the intermediary is subject to a legal professional privilege.

What are the respective deadlines for the intermediary and the relevant taxpayer to file the report? Are there deviations from the Directive in terms of filing the information within 30 days?

2021/06/17

For cross-border arrangements, the first step of which was implemented after 25 June 2018 and before 1 July 2020, the deadline for filing the report for the intermediary as well as the user is 31 August 2020. cross-border arrangements, which are made available/ ready for implementation/ the first step of which was implemented after the 1 July 2020 must be filed within 30 days.This deadline is applicable for both the intermediary and the user. However, there is the following deviation from the Directive: In case of an intermediary subject to a legal professional privilege, who is not released from his confidentiality obligation by the user, the deadline to file the primary report with general information about the cross-border arrangement is 30 days. After the registration number and disclosure number are forwarded to the user, another deadline of 30 days applies for the latter one to file a subsequent report with his/her own user-related information.

Which numbers are assigned by local tax authorities to the cross-border arrangements?

2021/06/17

The corresponding German tax authority "Bundeszentralamt für Steuern" assigns to each report of a cross-border arrangement a registration number and a disclosure number. The registration number will be exchanged with tax authorities of other Member States and therefore can be used in other Member States as proof that the report has been filed in Germany. Furthermore, in deviation from the Directive, the user needs to indicate the registration and disclosure numbers in the corresponding tax return in the period in which the tax advantage shall materialise for the first time.

What is the reporting deadline for arrangements the first step of which was implemented between 25 June 2018 and 30 June 2020?

When is the reporting deadline for arrangements for which the event triggering the reporting obligation lies between 1 July 2020 and 31 December 2020?

When is the reporting deadline for arrangements for which the event triggering the reporting obligation lies after 1 January 2021?

Penalties

In which cases are penalties imposed?

2021/06/17

Penalties are imposed in cases, if: 1. The report was omitted; 2. the report was filed late; 3. the report was filed incompletely; - the report is incorrect (i.e. containing incorrect information); or 4. the arrangement is not indicated in the corresponding tax return of the user. In case of an incorrect estimation of the arrangement´s value within the report, there will be no penalty. The penalties also apply to periodic reports which need to be filed every three months providing an update on marketable arrangements.

What are the penalties?

2021/06/17

Failure to comply with the MDR can be sanctioned with a fine of up to EUR 25,000.

Is a distinction made between penalties imposed on intermediaries/relevant taxpayers/other persons obliged to report?

2021/06/17

No distinction is made between intermediaries and users.

What are the penalties in case of redundant reports? A redundant report is a report, which was filed, although there is no obligation to file one.

2021/06/17

There are no penalties for redundant reports.

Do the penalties differ with regard to incomplete, incorrect, missing or late reports? Are there any gradations?

2021/06/17

The law does not specify any gradations for different breaches of the reporting obligation. Determining the penalty is at the discretion of the tax authorities while EUR 25,000 provides only for the upper limit.

Are arrangements the first step of which was implemented between 25 June 2018 and 30 June 2020 treated differently in the means of penalties?

Other aspects

Do already other reporting regimes on cross-border arrangements exist?

2021/06/17

In Germany no other disclosure regimes exist.

Are there any other special deviations from the Directive? 

2021/06/17

In Germany there are no other deviations from the Directive than those mentioned above.

What is the name of the national Tax Authority responsible for DAC6?

Do any other obligations apart from reporting a reportable cross-border arrangement exist under the national DAC6 legislation? (i.e. indication of the arrangement in the tax return)

Professional privilege/secrecy

Who is primarily obliged to report? Is there a primary reporting obligation of the intermediary or the relevant taxpayer? Is there legal privilege and in how far has it been considered for allocating the reporting obligation?

2021/06/17

The primary reporting obligation lies with the intermediary. However, the reporting obligation shall, fully or partly, pass to the user (relevant taxpayer) in three cases: (1) If no intermediary exists. (2) If there is no intermediary, who has a territorial nexus to Germany. (3) If the intermediary is subject to a legal professional privilege and the user has not released the intermediary from his confidentiality obligation. In this case, the intermediary has to report general data about the cross-border arrangement, while the user must report user-related data in a second step. In this case, the user has also the possibility to file the complete report on behalf of the intermediary. By using this legal technique, the German legislator ensures that intermediaries subject to a legal privilege (mainly tax advisors, auditors and lawyers) are not forced to contradict their confidentiality obligations towards their clients. In the same time, the intermediary, if engaged in the arrangement, is always obliged to report and to inform the user about the obligation to file a second report.

Does the reporting obligation breach a legal professional privilege under national law?

2021/06/17

The reporting obligation could be in breach with the legal professional privilege for certain professions e.g. laywers, tax consultants and auditors in Germany. In order to avoid conflicts, in deviation from the Directive for an intermediary subject to a legal professional privilege, the obligation to report user-related data passes on to the user, if the intermediary is not released from the confidentiality obligation by the latter. In this case, the intermediary is obliged to file a primary report with general information about the cross-border arrangement and must forward the received registration number and disclosure number to the user, so that the user must report his/her own user-related data subsequently. A user who has not released the intermediary from the confidentiality obligation files the complete report on behalf of the intermediary. If the user releases the intermediary from the confidentiality obligation, the intermediary directly can file the complete report, including user-related information.

Does the national law make reference to professional privilege or professional secrecy?

What is the difference, as per the national law, between professional privilege and professional secrecy?

To which categories of intermediaries does the professional privilege or professional secrecy apply?

In the context of the reporting obligation, under which conditions are the intermediaries entitled/obliged to make use of professional privilege or professional secrecy?

In cases in which professional privilege or secrecy applies, please describe the procedure for notification.

Does the national law provide specific conditions to waive professional privilege or professional secrecy?

Marcel Max
Manager