Since 1 July 2020, cross-border tax arrangements must be reported to the German Federal Central Tax Office (Bundeszentralamt für Steuern – BZSt) within 30 days. In addition, historical cases, i.e. tax arrangements the first step of which was implemented after 24 June 2018 but before 1 July 2020, must be reported within two months from 1 July 2020.
EU permits deferral of reporting deadlines
In light of the Covid-19 pandemic, EU member states agreed at the end of June to permit a six-month deferral of these reporting requirements (plus an option to defer for a further three months). With the German Corona Tax Assistance Act (Corona-Steuerhilfegesetz) of 19 June 2020, the German Federal Ministry of Finance (Bundesministerium der Finanzen – BMF) was authorised to determine a deferral of the deadlines by means of a BMF circular (BMF-Schreiben).
No deferral in Germany intended
On 6 July 2020, a spokesperson of the German Federal Ministry of Finance announced that German Federal Minister of Finance Olaf Scholz had declared himself against a deferral of the reporting obligations in Germany – contrary to the previous statements of the tax authorities. According to reports, the decision of the German Federal Minister of Finance is said to have surprised even the working level in the German Federal Ministry of Finance.
Should there actually be no deferral of the reporting deadlines, the following deadlines would apply to reporting to the BZSt:
- no notification obligation for tax arrangements whose first step has been implemented by 24 June 2018;
- until 31 August 2020 for tax arrangements whose first step was implemented from 25 June 2018 and before 1 July 2020; and
- within 30 days for tax arrangements as from 1 July 2020.
Under the previous drafts of the BMF circular on the tax reporting obligations under DAC 6 (some of which were not made publicly available) late notifications up to 30 September 2020 were not to be objected because interfaces for electronic transmission to the BZSt were not fully available on 1 July 2020. In view of the current statements by the Federal Ministry of Finance, it is unclear whether even this deadline extension will also be cancelled.
Fines for failure to report, late reporting or incorrect reporting
A violation of ongoing reporting obligations, i.e. concerning tax arrangements after 1 July 2020, constitutes an administrative offence and can be sanctioned with a fine of up to EUR 25,000 per reporting. Violations of retrospective reporting obligations relating to tax arrangements prior to 1 July 2020 are not subject to fines.
A violation of the reporting obligations according to §§ 138d ff. AO is not only the failure to report, but also the late or incorrect reporting.
In view of the current developments and the short reporting deadlines of only 30 days, all cross-border matters should be rapidly reviewed with a view to imposing an obligation to report to the BZSt. Special attention should be paid to the ongoing reporting obligations as of 1 July 2020 due to the threat of fines.
Internal compliance systems, which have not been implemented yet in view of the anticipated deferral of deadlines, should now be pushed forward with particular effort in order to avoid possible fines.
Especially if several persons in different jurisdictions are subject to the reporting obligations, the announcement of the German Federal Minister of Finance leads to an increased compliance effort for German persons subject to reporting obligations. While the persons subject to reporting obligations do not yet have to make a reporting due to the deferral of the deadline in their EU member state, the deadline for the German persons subject to reporting obligations is already in force. It is therefore expected that until the beginning of next year a coordination of the reporting between the parties subject to reporting obligations will not be decided on the basis of substantive proximity but on the basis of their residence in Germany.
The final version of the BMF circular is expected in mid-July and should provide clarity on the different reporting deadlines. However, a deferral of the deadlines by six months is no longer anticipated.
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CRS and DAC 6 – Will the deadline extension arrive in time?