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ELSAVCO: 6+1 Things You Need To Know About DAC6 in Cyprus

The Cyprus Tax Authority issued an announcement on November 22nd, 2021, extending the deadline for submitting the DAC6 reports without penalty until the 31th January 2022.

Here’s what you need to know about DAC6 Cyprus.

1. What is DAC6?

On June 25th, 2018, an EU Directive (also known as DAC6) went into effect. DAC6 is intended to provide early warning to EU tax authorities of new cross-border tax schemes and it necessitates notifying tax authorities of cross-border tax arrangements that meet certain "hallmarks."

2. Who should apply the DAC6?

Multinational Enterprises (i.e: MNEs) operating in one or more of the 28 countries (EU27+UK) are severely affected by DAC6.

3. When do you need to start the compliance process?

From July 2020. Any reportable cross-border arrangement implemented after that date must be reported to the tax authorities, within 30 days of the reporting trigger.

As a transitional rule, intermediaries and relevant taxpayers are required to disclose information on reportable cross-border arrangements, with the first step taking effect between June 25, 2018 and June 30, 2020. This information would have to be submitted by 28 February, 2021.

Since the Cyprus Tax Authority has announced that the deadline for reporting DAC6 arrangements will be extended to January 31th, 2022, this extension will apply to all retroactive reporting beginning on June 25, 2018.

All of the following cases have had their deadlines extended:

✔️Reportable cross-border arrangements made between June 25th 2018 and June 30th 2020.

✔️Cross-border arrangements that were made between 1st July 2020 and 31st December 2020 and had to be submitted by 31 January 2021.

✔️Reportable cross-border arrangements made between the 1st of January 2021 and the 1st of January 2022 that required submission within 30 days.

4. Is non-compliance an option?

Non-compliance carries significant penalties, so it pays to be prepared. Cyprus for example, imposes a fine that varies from €10.000 to €20.000 if there is a failure to submit information, whilst fines for overdue submission range between €1.000 to €5.000 for late submission of up to 90 days, whilst fines for overdue submission range between €1.000 to €5.000 for late submission of up to 90 days.

5. Is it possible to completely outsource compliance?

DAC6 Cyprus entails the continuous collection and reporting of company-specific data, as well as the active participation of multiple company personnel, not just the tax department. If you wish to carry these tasks outsource, they must be limited to determining whether you have a reportable arrangement and filling out the form (tasks that can be just as easily automated by a well-designed software solution), but continuous data gathering cannot be outsourced to any firm.

6. Can you use Office Tools to comply?

Some companies may attempt to comply using Excel or other Office Tools or softwares, but DAC6 Cyprus compliance is a bit more complicated:

  • The reporting process is complex–the requirement to report arrangements within 30 days and resulting transactions annually.

  • Extensive country coverage.

  • Reporting frequency.

  • The requirement to develop new tax department workflows.

  • Reports must be submitted to tax authorities in electronic format, adhering to strict schemas, and have to pass validation rules.

7. How should a good situation appear?

  • A well-structured workflow that will take you from data collection to filing, with automation built in at every stage.

  • RCBA is identified using a database of country tax rules that are automatically applied to arrangement facts.

  • Analytics for quickly determining the status of RCBA (Reportable Cross Border Arrangement), including the ability to filter by due dates and filings by reporting country.

  • Tables comparing variations from the EU Directive.

  • Automated logic to determine which entities and countries within an MNE's footprint can trigger DAC6 hallmarks.

So after going through all this information, are you ready for DAC6 compliance? Learn more about DAC6 Cyprus and how Elsavco can help you and your company save time and avoid costly penalties. We have a group of dedicated professionals with extensive experience in audit, tax and advisory services that are committed to providing high-quality, truly excellent, partner-led service. Our goal is to work with you in order to help you with business development and entrepreneurial growth. Changes in tax laws, new regulations and general tax updates are issued on a regular basis to keep our clients up to date on the latest tax news.

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