- DAC 6 requires the disclosure of certain cross-border planning.
- The Directive is broadly drafted, as is the definition of the ‘intermediaries’ who need to make the disclosure. Lombard International Assurance will often be an intermediary, as may its distribution partners.
- Luxembourg insurance industry guidance is now available, and the shared view in Luxembourg is that not all cross-border policies are disclosable.
- Nevertheless, as DAC 6 applies to planning from 25 June 2018, an assessment of existing and new policies is required.
- Lombard International Assurance will reach out to you should existing or new disclosable policies be identified.
- While each ‘intermediary’ must carry out its own assessment under local rules and in light of information available to them, we would welcome an open dialogue with a view to preventing unnecessary or duplicate disclosure.
Background on DAC 6
Council Directive (EU) 2018/822 – known as DAC 6 – was transposed into Luxembourg law on 21 March 2020. The Directive, which is inspired by the BEPS Action 12 Final Report on the design of mandatory disclosure rules, requires intermediaries to disclosure certain cross-border arrangements to their national tax authorities following which the details of those arrangements are shared with other Member States. Whether or not a person is an intermediary will depend the extent of its involvement in the arrangement.
Although the primary objective of the Directive is to prevent the erosion of Member State tax bases through potentially aggressive cross-border planning, the legislation is drafted widely. A broad implementation and interpretation in a Member State could require the disclosure of even benign planning involving funds, banking products, pensions and insurance.
How does DAC 6 affect Lombard International Assurance policies?
At Lombard International Assurance, we have worked closely with ACA – the Luxembourg insurance association – and the authorities with regard to the implementation and interpretation of the law. ACA guidelines for the Luxembourg insurance industry are now available at the link below.
The view in Luxembourg, which is held by Lombard International Assurance and the wider insurance industry, is that cross-border insurance-based planning is not systematically reportable. Additionally, tax-related insurance planning that is in accordance with the objective of the legislation on which it is based should not, of itself, trigger a reporting obligation. This view is also reflective of the commentary to the draft Luxembourg implementing law, and of the related Parliamentary Committee report (Commission des Finances et du Budget). At Lombard International Assurance, we are of the view that over-disclosure is neither necessary nor desirable.
DAC 6 nevertheless requires an assessment of any arrangement (in the case of insurance, a new policy or a substantial change to an existing insurance structure) implemented since 25 June 2018 (Existing Arrangements), and of arrangements implemented from 1 July 2020 (New Arrangements).
A word on timing
On 24 June 2020, the Council of the European Union adopted a Directive that allows Member States to delay the disclosure and exchange deadlines under DAC 6 by 6 months, placing the disclosure date for Existing Arrangements at 28 February 2021 and the starting date for disclosing New Arrangements at 1 January 2021. However, it is for Member States to confirm whether or not they will adopt the delay.
Luxembourg has confirmed that it will do so. It is only the disclosure and exchange deadlines that are delayed and a view must nevertheless be taken in respect of New Arrangements from 1 July this year. We have therefore not delayed our internal readiness for DAC 6.
What are we doing to prepare for DAC 6?
We have worked quickly to establish internal processes to assess, document and, if necessary, disclose planning to the Luxembourg tax authority. We have also launched an internal DAC 6 Group, which is charged with the assessment of our solutions in light of DAC 6.
Our review of Existing Arrangements is nearing completion and we will contact you should we encounter an arrangement that may need to be disclosed so that clients can be informed in good time before any such disclosure. For New Arrangements, we will contact you before any new policy or substantial change is implemented by us if we believe that a disclosure may be required.
As a partner of Lombard International Assurance, do I need to do anything?
Each Member State intermediary involved in an arrangement must conduct its own assessment of that arrangement under DAC 6.
Additionally, the implementation and interpretation of DAC 6 in Member States other than Luxembourg may differ, and we may not be privy to any broader planning of which a Lombard International Assurance policy is only part.
If you have a connection with a Member State – for example because your firm is incorporated or tax resident there, governed by laws there, provides services via an establishment there or is registered with a professional legal, tax or consultancy association there - then we would welcome an open dialogue with you on DAC 6 in order to align our approach to the legislation, and also with a view to avoiding multiple disclosures. While all intermediaries involved in an arrangement are under an obligation to assess whether or not the arrangement is disclosable, intermediaries need not disclose if they have proof that another intermediary has made the same disclosure. However, that proof must be unequivocal and shared quickly.
We look forward to working closely with you to ensure compliance with DAC 6 in a way that delivers on the objectives of the legislation.
If you have specific questions or concerns, please direct them to your usual Lombard International Assurance contact or to DAC6@lombardinternational.com.
ACA DAC 6 Frequently Asked Questions (in French): https://www.aca.lu/media/5ecbc57dd85c1_aca-faqs-140520.pdf
Also available here under FAQs: https://www.aca.lu/fr/parutions