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Reading time: 7 minutes | January 28, 2021 | by Bilal el Amraoui


Based on the EU Directive for Administrative Cooperation, No 6. (“DAC6“), intermediaries or taxpayers are obliged to actively report certain tax constructs to the tax authorities. For the purpose of the Directive, any arrangements that present a potential risk of tax avoidance should be reported. However, certain arrangements are only reportable to the extent that the main benefit test has been met. The main benefit test dictates that at least one of the main objectives of a certain arrangement should be tax savings.

The primary objective of the Directive is to share knowledge about cross-border tax structures, which will give legislators in the Member States an opportunity to combat any tax-saving structures that are considered undesirable. To this end, the notifications received by the relevant tax authorities will be exchanged with the tax authorities in the other (affected) EU Member State(s).

Mandatory Disclosure Directive

Hallmarks and main benefit test

The characteristics or features of a cross-border arrangement that indicate a potential risk of tax avoidance are commonly referred to as “hallmarks”.

The main benefit test applies to generic hallmarks as well as several specific hallmarks. In compliance with the DAC6 regulations, the main benefit test verifies if the main benefit, or one of the main benefits, that a person may reasonably expect to derive from an arrangement is to obtain a tax advantage.

The main benefit test compares the value of the expected tax advantage with any other benefits likely to be obtained from the transaction, and has the advantage of providing an objective assessment of the tax benefits.

Notification obligations

In principle, the obligation to file a report lies with a company‘s intermediaries and so-called auxiliary intermediaries, which can include many types of tax, corporate, financial, legal or investment service providers such as tax advisers, accountants, lawyers, civil-law notaries, banks and corporate service providers (former trust offices), but also investment bank portfolio managers. In specific cases, the duty to issue a report shifts to the taxpayer; for example, if the intermediary invokes a right of privilege or in the absence of an intermediary (as may be the case where the arrangement was conceived, managed and implemented by an in-house department of the taxpayer). In some cases, there may be an exemption from the duty to disclose; for example, if the same information about the arrangement has previously been disclosed by another intermediary.


Substantial sanctions are attached to the obligations under DAC6. Non-compliance with the obligations, mistakes or even inappropriate filing can result in an administrative fine or criminal prosecution, where the fines range in size from moderate to very high, depending on the EU country involved. Nonetheless, having an “arguable point of view” may prevent the imposition of a fine.


The main challenges imposed by DAC6 can be divided into two categories: technical challenges and process challenges. Interpretations of the hallmarks and the disparities between Member States (e.g., Portugal and Poland) are the primary subjects of the technical challenges; whereas the process challenges are focused on the internal process and documentation of the assessments.

Technical challenges

The technical challenges relate to the interpretation and scope of implementation of the directive in individual Member States, particularly as disparities can be observed in several Member States. In certain EU Member States, the implementations of the Directive are even wider in scope when compared to the provisions laid down in the EU Directive; e.g., the obligation to report may be extended to include domestic tax arrangements, or to include additional tax types, or may have different language requirements and require additional information, etc.  As an intermediary or multinational, keeping track of all these differences may prove to be a challenge.

Process challenges

In several Member States (e.g., the Netherlands), the tax authorities have announced that intermediaries are expected to design a process for their DAC6 assessments and filings. An intermediary should also foster internal awareness regarding the legislation and its process. The following challenges can be observed in implementing such a process:

  • Internal awareness and education: taking the interpretations of all individual Member States into account.
  • Assessment workflow: a complete and coherent workflow is required for all assessments.
  • Deadline management: monitoring all arrangements and deadlines.
  • Repository: an up-to-date repository with all filings, assessments, supporting documents and decision tracking.
  • Audit trail: a complete audit trail of all relevant activities and documents related to the assessments.


DAC6 poses several challenges, all of which should be considered when designing a proper DAC6 assessment and filing process. These challenges pose a risk to both the substantive assessment of the main benefit test and the hallmarks, as well as a risk to the process itself. Therefore, any solution aimed at addressing the DAC6 requirements should take the following aspects into account:

  • Education and awareness: technical information with regards to the local DAC6 implementation measures, as well as a broader sense of awareness with regards to the purpose, risks and penalties imposed by DAC6.
  • Workflow management: streamlining the process in a uniform, efficient and effective manner.
  • Repository and audit trail: building a database of all assessments (reportable and non-reportable) and all supporting documents, with decision reasoning and commentaries.