A group of financial associations – including Insurance Europe – has written a joint letter to Commissioner Paolo Gentiloni to ask for reporting obligations relating to the EU’s 2018 update of its cross border tax directive (DAC6) to be deferred until 2021, as financial institutions currently face significant implementation challenges outside of their control, including most recently the COVID-19 pandemic.
The late enactment of legislation related to DAC6 by many member states, as well as the lack of detailed guidance and reporting schema details, and the differences in key interpretations between member states that did enact legislation, have already made the timely implementation of DAC6 challenging. This has now only been exacerbated by the pandemic.
For example, the development of the reporting software needed to make the required filings relies on a timely release of reporting schema and validation rules, as well as the ability to test how the technology interacts with a government reporting portal.
Therefore, if COVID-19 delays the release of reporting schema and validation rules even further, financial institutions and governments will only have a limited time to ensure that the required systems are in place. This could jeopardize qualitative reporting.
An EU-wide deferral to 2021 would give financial institutions time to introduce new processes once workforce levels and IT capacity have recovered. It should be noted that the legislation already applies retroactively and a delay in reporting deadlines would only impact the timing of when information is provided to member states.