Consequences of the COVID-19 outbreak
Due to the COVID-19 pandemic, the EU Commission has published a proposal for a directive to extend the notification deadlines within the scope of the notification obligation for cross-border tax arrangements. We present the main contents to you.
The outbreak and containment of COVID-19 are placing unprecedented demands on entrepreneurs, companies and their advisors. In addition to many immediate measures, such as tax deferrals or liquidity assistance, administrative relief is also intended to provide relief. One such measure relates to the notification requirement for cross-border tax arrangements. According to a draft directive from the EU Commission last Friday, reporting deadlines in this regard, which would currently have to be met from summer 2020, are to be postponed.
The reporting obligation for cross-border tax arrangements is anchored in Germany in sections 138d to 138k of the German Fiscal Code (AO) and will apply from July 1, 2020. The EU directive on which the German regulation is based stipulates that tax arrangements that have certain characteristics and contain a cross-border element must be reported to the tax authorities by the so-called intermediary or by the user of the arrangement. The actual reporting obligation should be in place from 01.07.2020 at the latest. For the current status of the implementation of the notification obligation in Germany, we would like to refer you to our PSP News article from 10.03.2020 as well as to our PSP webinar from 30.04.2020 point out.
Deadline for submitting the report in principle 30 days
Designs for which the reportable event - for example, the provision of the design by a consultant - occurs on or after July 1, 2020 must generally be reported to the BZSt within 30 days of the occurrence of the reportable event in accordance with Section 138f AO. The reportable event is the earliest point in time at which either the design has been made available for implementation by an intermediary, the user is ready for implementation or has taken the first step towards implementation. The notification requirement also affects designs whose first step was implemented between June 24, 2018 and June 30, 2020. For these so-called "old cases", Section 33 EGAO in the currently valid version stipulates that the relevant notifications must be submitted within 2 months from 30.06.2020, i.e. by 31.08.2020. Exceeding the reporting deadline as well as the omission of a report constitutes an administrative offense, at least for the arrangements that do not constitute old cases, which can be punished with a fine of up to EUR 25,000.
Extension of the deadline for reporting
Due to delays in the technical implementation, the German tax authorities had already announced that late reports submitted to the BZSt by 30.09.2020 would not be penalized. Initiated by the COVID-19 pandemic, the EU Commission has now proposed an extension of the reporting deadlines following an informal meeting on 29.04.2020, although the basic reporting obligation remains unaffected.
The corresponding draft directive initially provides for an extensionfrom 3 months each before:
For old cases, the reporting deadline is to be extended from Aug. 31, 2020, to Nov. 30, 2020.
For tax arrangements whose first reportable event occurs after 30.06.2020, the 30-day period for notification is to start only from 01.10.2020 and not already from 01.07.2020. The first notifications would thus have to be submitted by 31.10.2020.
Due to the still unclear further developments of the COVID-19 pandemic, the draft directive also contains a possibility for the EU Commission to extend the notification deadlines by a further maximum of 3 months by direct legal act.
A postponement of the statutory reporting requirements was called for by many stakeholders and is certainly appropriate in the current situation. Since the representatives of the member states are reported to have spoken unanimously in favor of the draft directive, adoption as a directive can be expected soon. The directive must then be transposed into national law in the short term in order to take effect in Germany in good time before the end of the reporting periods currently provided for by law.
It should not be forgotten that the measure will only lead to a time delay. This delay should be used by all parties involved: On the one hand, reporting entities should use the additional time to implement processes for the assessment of tax structuring as well as the fulfillment of the corresponding reporting obligation in time to avoid fines. On the other hand, it would be highly desirable if the tax authorities also used this delay to provide companies, individuals and intermediaries subject to the reporting obligation with more guidance on many terms in need of interpretation in the legal implementation than is provided, for example, in the current draft of a BMF letter.