Financial institutions subject to reporting requirements must submit their FATCA and CRS reports to the Federal Central Tax Office (BZSt) by 31 July each year for the previous year. In view of the COVID 19 pandemic, a number of Member States and individuals have requested the EU Commission to extend this year’s reporting deadlines, particularly in the area of the automatic exchange of information CRS and the reporting of cross-border tax arrangements under DAC 6. The EU Commission has responded to these requests and published a – welcome – final proposal for a Directive amending the Mutual Assistance Directive (COM(2020) 197 final) on 8 May 2020. However, it is questionable whether the deadline extension will still come into force (in time).
Initial situation
The summer traditionally marks the beginning of the annual reporting season in the field of automated information exchange on financial accounts according to the international reporting standards FATCA, an agreement-based exchange of information with the USA on financial accounts of US taxpayers, and the so-called Common Reporting Standard (CRS), a multilateral reporting system introduced on the initiative of the OECD and additionally implemented in the EU on the basis of the EU Mutual Assistance Directive.
This year also sees the addition of reporting obligations for the use of cross-border tax structures under the so-called DAC 6 Directive (amending Directive (EU) 2018/822 to the EU Mutual Assistance Directive), which was implemented in Germany with effect from 1 January 2020. According to this directive, tax planning in the sense of DAC 6, for which the first step of the planning was implemented after 24 June 2018 and before 1 July 2020 (so-called “old cases”), will have to be reported to the BZSt in the period from 1 July 2020 to 31 August 2020.
So-called “new cases”, in which the tax planning is provided from 1 July 2020, the user is prepared to implement it or at least one user has taken the first step towards implementation, must be reported to the BZSt within 30 days of the earliest of the above-mentioned dates. The reporting period for new cases therefore also begins for the first time on 1 July 2020.
EU Commission plans to extend deadlines
On 8 May 2020, at the request of a number of Member States, the EU Commission published a – welcome – final proposal for a Directive amending the Mutual Assistance Directive (COM(2020) 197 final). On the one hand, it provides for an extension of the deadline for the Member States to exchange data reported by financial institutions for the 2019 reporting period by three months, i.e. until 31 December 2020. However, this does not affect the obligation of German financial institutions to submit their reports to the BZSt by 31 July 2020. This is because the Mutual Assistance Directive leaves the design of the CRS reporting procedure to the Member States. In this respect, the German legislator alone is called upon to extend the reporting deadline for financial institutions set by it within its implementation scope (or to announce at administrative level that no objections will be raised to late reports within a “grace period”).
On the other hand, the EU Commission’s draft directive provides for an extension of the deadlines for the submission of DAC 6 reports by intermediaries and/or users to the competent Member State financial authorities in relation to cross-border tax arrangements. Thus, reports on old cases are to be submitted by 30 November 2020 instead of 31 August 2020. The 30-day reporting period for new cases is to begin on 1 October 2020 instead of 1 July 2020, so that new cases are to be reported for the first time by 30 October 2020 at the latest. However, the planned extension of the deadline has no effect on the deadline of 1 July 2020 for the classification of a cross-border tax arrangement as a new case. Cross-border tax arrangements that become subject to reporting between 1 July 2020 and 30 September 2020 will therefore continue to be considered new cases. Only the start of the reporting period is suspended until 1 October 2020.
Furthermore, according to the draft directive, the EU Commission is to be given the right to extend the above-mentioned deadlines itself by a maximum of three additional months by means of a delegated legal act if the exceptional circumstances of serious public health risks resulting from the COVID-19 pandemic persist during the deadline extension and the member states have to implement initial restrictions.
Outlook – Will the deadline extension come into force (in time)?
For financial institutions subject to reporting requirements under CRS, the EU Commission’s proposal does not result in any improvement; this year, the reporting deadline would still be 31 July 2020. However, the BZSt already announced in an information letter on 8 May 2020 that, against the background of the current situation, discussions on the extension/postponement of deadlines were taking place under high pressure – also at international level – and that new information would be provided on the BZSt website and in other information letters. This means that an extension of the deadline for financial institutions required to report under the CRS is not yet finally off the table. In view of the fact that many larger financial institutions cannot wait until shortly before the end of the reporting period on 31 July 2020 to start submitting their reports due to the volume of data to be reported, an extension of the CRS reporting period, if adopted, should only be relevant for smaller financial institutions or, if adopted shortly, for those that are not.
The same applies to the extension of the reporting deadlines for cross-border tax arrangements under DAC 6. The effect of the announced deadline extension threatens to fizzle out if the parties involved are forced to prepare and submit their reports to the BZSt nevertheless within the currently applicable deadlines due to uncertainty as to when the deadline extension will take effect. The EU Commission should also be aware of this. For this reason, its proposal for the extension of the reporting deadlines stipulates that the Member States must implement the deadline extensions contained therein by 31 May 2020 at the latest and apply them from 1 June 2020. However, this deadline has now passed without the procedure for amending the Mutual Assistance Directive having been completed at EU level. According to reports, however, the aim is to complete the procedure by the end of June. On the other hand, the Bundestag has in the meantime already become active and on 28 May 2020 created a regulation authorisation for the Federal Ministry of Finance to implement the deadline extension to be decided at EU level by means of a BMF letter (§ 33 (5) EGAO). It can therefore only be hoped that the planned deadline extensions will be adopted before the deadline expires.
This article was first published in: Handelsblatt online, Tax Board, 3 June 2020
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