The Malta Commissioner for Inland Revenue (“Commissioner” or “CIR”) has issued guidelines (the “Guidelines”) on the 4th January 2021 seeking to present further clarity with regards to the reporting obligations under Council Directive 2011/16/EU as amended by Council Directive (EU) 2018/822 on 25 May 2018 (“Directive on Administrative Cooperation”, “the Directive” or “DAC6”) in connection with the mandatory automatic exchange of information in relation to reportable cross-border arrangements. DAC6 came into force on 25 June 2018.
DAC6 has been implemented into Maltese legislation by virtue of legal notice L.N. 342 of 2019 which amended S.L. 123.127, entitled the Cooperation with Other Jurisdictions on Tax Matters Regulations (“the Regulations”).
Applicability
To permit for novel initiatives in tax transparency, DAC6 obliges intermediaries and, in certain circumstances, relevant taxpayers to make available information on reportable cross-border arrangements to EU Member States’ tax authorities.
Automatic exchange of information is regarded as the most essential instrument to fight tax fraud and tax evasion in the last few years. In line Article 2 of the DAC6 this disclosure regime applies to all types of taxes except for value-added tax, customs duties, excise duties and compulsory social security contributions. Cross-border arrangements are reportable if they contain certain features known as hallmarks, which cover a broad range of structures and transactions.
Due to the effects caused by the COVID pandemic, the DAC6 was further amended by Council Directive (EU) 2020/8763 of 24 June 2020, in order to address the urgent need to defer certain time limits for the filing and exchange of information in the field of taxation and ensure that taxpayers and intermediaries have additional time to comply with their obligations with minimal impact on their business.
Definition of Intermediary
Section 13(9) of the Regulations provides two types of intermediaries:
Primary Intermediary - a person that designs, markets, organises or makes available for implementation or manages the implementation of a reportable cross-border arrangement;
Secondary Intermediary - a person that, having regard to the relevant facts and circumstances and based on available information and the relevant expertise and understanding required to provide such services, knows or could be reasonably expected to know that they have undertaken to provide, directly or by means of other persons, aid, assistance or advice with respect to designing, marketing, organising, making available for implementation or managing the implementation of a reportable cross-border arrangement.
To fall within the definition of intermediary under either category a person must meet at least one of the following conditions:
- be resident for tax purposes in an EU Member State;
- have a permanent establishment in an EU Member State, through which it provides the services with respect to the arrangement;
- be incorporated in an EU Member State, or governed by the laws of an EU Member State;
- be registered with a professional association relating to legal, taxation or consultancy services in an EU Member State.
Exceptions
Interesting to note that an intermediary, whose profession is referred to under Article 3 of the Professional Secrecy Act, has a right to a waiver from the reporting obligations above if such reporting would be deemed an offence under article 257 of the Maltese Criminal Code. This would entail that such intermediary informs another intermediary (if there is another one in the transaction) or the tax payer of their obligation to report and such obligation would be shifted to the latter.
