On June 25 2018, an amendment to Directive 2011/16/EU (DAC6), came into force, which may have a significant impact on Swiss entities. DAC6 requires the disclosure of certain cross-border tax planning arrangements to the local tax authorities. While the rules do not apply in Switzerland directly, Swiss intermediaries may be affected if they have operations or otherwise provide services in any EU country. Even purely Swiss intermediaries that serve EU clients should carefully consider the impact of DAC6.
Any person who designs, markets, organises, makes available for implementation or manages the implementation of a reportable cross-border arrangement (or who has provided aid, assistance or advice on such an arrangement) is considered to be an intermediary. If the intermediary also meets one of the following criteria, they are captured by the mandatory disclosure rules set out in DAC6:
- Resident in an EU member state;
- Provides the above services through a permanent establishment in an EU member state;
- Incorporated or governed by the laws of an EU member state;
- Registered with a professional association related to legal, taxation or consultancy services in an EU member state.
For example, a Swiss bank which maintains branches in one or more EU countries will be directly affected and will be considered an EU intermediary under the new rules. Likewise, a Swiss consultancy firm registered with an EU-based professional services association falls within the scope of DAC6. Additionally, any EU-incorporated entity with a place of effective management in Switzerland will still be affected, even though the entity is considered a Swiss tax resident. In all these cases, Swiss entities are considered intermediaries and will be required to report certain cross-border arrangements to the respective EU tax authorities.
One further requirement will impact Swiss entities, even if they have no presence in the EU. DAC6 contains provisions that require a tax resident of any EU member state to report the arrangement if no intermediary does. This means that any Swiss entity advising on cross-border arrangements involving an EU resident client should understand the client service impact and consider informing its clients of their reporting obligations. Practically speaking, any intermediary that serves EU clients should be familiar with the mandatory disclosure rules imposed by the EU.
Next steps for Swiss entities
Swiss-headquartered groups should identify entities directly affected, including assessing whether a Swiss entity is active in an EU country. Next, a potential intermediary should perform an impact assessment to identify whether the services provided fall within the scope of DAC6.
In our discussions in the Swiss market, local intermediaries are struggling to articulate the impact and next steps to internal stakeholders. We recommend that, for internal stakeholder discussions, Swiss intermediaries consider the end-client impact of cross-border arrangements involving EU tax residents.
Given that all relevant cross-border arrangements that entered into force after June 25 2018 are in-scope, the time to act is now.