The MDR Directive entered into force on June 25, 2018, and is being implemented into domestic tax legislation by each EU member country in 2020 with a retroactive effect as per June 25, 2018.
Under the MDR Directive, intermediaries must report potential cross-border tax aggressive arrangements involving either more than one EU country or an EU country and a third country. Instead of defining “potential tax aggressive,” a cross-border arrangement is reportable if it meets at least one of the specified 16 hallmarks, such as deductible payments to an associated entity exempt of taxation at the recipient level. These hallmarks are categorized into (i) generic hallmarks and specific hallmarks triggering a reporting obligation only if the main benefit test is satisfied, and (ii) other specific hallmarks triggering a reporting obligation.
Reporting by intermediaries
The reporting obligation applies to EU based intermediaries, which are defined as any person that designs, markets, organizes, or makes available for implementation or manages the implementation of the reportable cross-border arrangement in the EU. This includes not only tax advisors, lawyers, accountants, and related advisors but also includes, by definition, corporate service providers such as Amicorp. Where there is no EU intermediary involved, the reporting obligation gets shifted to the individual or corporate taxpayer involved in the arrangement.
Our MDR services
To assist our clients in being compliant with the MDR, we have developed tools and policies to identify and report the MDR cross-border arrangements.
Our in–house tax experts, together with respective account managers in our EU based offices, are reviewing all the transaction/ arrangements for client entities implemented since June 25, 2018, to determine the MDR reportable arrangements. If reportable, we will undertake the necessary MDR reporting within the statutory timelines. We work together with other intermediaries to mitigate any overlap of MDR compliance.
Our services include:
Reporting & maintenance services
- A review of EU cross-border arrangements implemented since June 25, 2018
- Liaison and coordinate with client and the other service providers involved in the arrangement
- If reportable, conclude with other intermediaries who will undertake the MDR reporting
- File the MDR reporting with the tax authorities within statutory timelines, as and where applicable
- Maintenance of adequate MDR analysis, reporting, and documentation
- Generate periodic MDR summary reports for all reportable as well as non-reportable cross-border arrangements for the documentation purpose
Preferred intermediary services
We can be appointed as “Preferred MDR intermediary” for MDR review and reporting in cases where an Amicorp EU office is involved as an intermediary for any EU cross-border arrangement. That Amicorp office would undertake to comply with the MDR for our client entity, and take the lead in coordinating other intermediaries involved. This would help our clients in centralizing the MDR compliance with one intermediary, making it easy for them to track and monitor, mitigate duplication of work and fees. This way, they can rest assured that MDR compliance for all their cross-border arrangements involving EU countries is covered.
Effective dates and deadlines
The MDR Directive entered into force on June 25, 2018, and is to be implemented by EU countries by December 31, 2019. The provisions will be applied retroactively for all reportable arrangements starting June 25, 2018.
Based on the initial MDR Directive, the first reporting of the MDR reportable arrangement would be due by August 30, 2020. However, due to the COVID-19 pandemic, the EU has agreed in supplemental MDR Directive to allow an optional six-month deferral of reporting deadlines. Except for Germany and Finland, all EU countries apply for a 6-months extension as follows:
- Reportable arrangements where the first step of implementation is taken (or significant amended) as of June 25, 2018, until June 30, 2020, will have to be reported by the intermediary by February 28, 2021.
- Reportable arrangements implemented between July 1, 2020, to December 31, 2020, are to be reported by January 30, 2021.
- From January 1, 2021, the reportable arrangements must be disclosed within 30 days from the day that the arrangement was made available or ready for implementation, or when the first step in the implementation was made.
Non-compliance with the MDR may trigger substantial penalties as established by each jurisdiction, which can go up to several hundred thousand euros.