The wording of the directive, which was passed on 13 March 2018, is seen as a “compromise wording”, as the Council of the European Union did not ultimately adopt some of the relatively radical recommendations of the European Parliament. Despite this fact, for instance, the limited retroactive effectiveness of the directive was preserved. Thus, the disclosure obligation will also relate to all arrangements, the implementation of which will be commenced by the tax payers already on the day the directive is issued in the Official Bulletin of the EU (that is, as expected, already in 2018) or later.

The member states are obliged to transpose the directive into their legal systems to ensure that the new rules become effective on 1 July 2020, at the latest. Some states, however, have been preparing the relevant regulations to come into effect earlier.

Subject of Disclosure

The directive introduces a new disclosure obligation and subsequent automatic exchange of information among the EU member states for arrangements with the following features:

1. The arrangement has cross-border elements defined by the directive; and
2.  The arrangement has some of the elements defined in the annex to the directive, and at the same time, the main or one of the main benefits of the arrangement involves gaining “expectable” tax benefits; of
3.  The arrangement is of a specific type and has at least one of the elements set forth in the annex to the directive (eg certain elements related to transfer pricing or lack of clarity in terms of the beneficial owner).

Entities Obliged to Report Cross-Border Arrangements

• The disclosure obligation to the relevant tax administrator will principally apply to so-called ‘intermediaries’.
• The directive defines intermediaries as any person that designs, markets, organises or makes available for implementation or manages the implementation of a reportable cross-border arrangement. However, the disclosure obligation will be borne by all persons that knew or could have known that they undertook to provide direct or indirect support, help or advisory in respect of the above-defined activities related to cross-border arrangements.
• In the event that the intermediary is prevented from meeting the disclosure obligation due to its legal confidentiality obligation (which, in the Czech Republic, applies to tax advisors and attorneys-at-law), the disclosure obligation shifts to the tax payer who intends to benefit from the relevant arrangement.
• The tax payer will also bear the disclosure obligation in the following cases: In the event that no intermediary took part in the reported cross-border arrangement (eg if the tax payer creates the arrangement itself or with the help of a party that cannot be denoted as an intermediary); or in the event that the intermediary itself is not subject to the disclosure obligation (eg the intermediary provides its services completely outside the territories of the EU member states).
• The tax payer will also be obliged to submit information to the tax administrator on the utilisation of the relevant arrangement for every year in which the arrangement is applied.
• The member states will be obliged to define effective sanctions for non-compliance with the obligations set out by the directive.
• Protection of good faith: It will not be possible to impose penalties for non-compliance with the disclosure obligation on entities that prove that they did not know they were engaged in a cross-border arrangement to which the disclosure obligation applies.

Deadlines to Submit Reports

• Cross-border arrangements affected by the directive, the implementation of which commenced between the issuance of the directive in the Official Bulletin of the EU (the issuance of which is anticipated to take place already in 2018) and 1 July 2020 are to be reported by the relevant entities by 31 August 2020
• In other cases, the reporting deadline is defined as 30 days (i) from the day on which the draft arrangement was prepared and the support, help or advisory therefor was provided, (ii) from the day on which the arrangement was prepared for implementation, or (iii) from the day on which the implementation of the arrangement began. The deadline start will be determined based on which of the events referred to above occurs earlier for the entity obliged to report.

Silence of the Tax Administrator Does not Mean Its Agreement
The directive explicitly states that the tax administrator’s not responding to notifications does not automatically mean that it agrees with the reported cross-border arrangement.

Retroactive Effectiveness
The disclosure obligation also applies to cross-border arrangements, the implementation of which was commenced by the tax payers between the day the directive entered into force and the day it was effectively transposed into the legal systems of individual member states (ie by 1 July 2020, at the latest).

Automatic Exchange of Information among the Member States
The member states will automatically exchange the information collected as part of the compliance with the disclosure obligation. The first set of information is to be submitted by 31 October 2020.