In our last blog of the series, the first, we had outlined some of the basic rules involved in the mandatory disclosure reporting. In continuation of the same information, in this blog, we delve into the details of certain rules and regulations that you may need to follow in order to check off the information you are liable to report.
As a thumb rule, the intermediary, middleman or the outsourced agency, as the case may be, shall be the primary body accountable for the reporting liability. However, if the said individuals or entities are not available or are located outside the EU territory, the liability to submit documents and reports rests with the primary tax payer.
It must also be noted that if there is an “in-house” department or a section, designated to function for this initiative, then this department or section is liable to report the said arrangement.
If there is more than one intermediary, each one of them will be required to file the arrangement.
Further, an intermediary need not file an arrangement, if it can prove that the same has already been files by another intermediary under the EU country. It is important to maintain an archive of all reporting arrangements, be it as an intermediary or as a tax payer.
The head of tax may want to devise a system whereby there are in-built controls at every stage of reporting arrangements at the group level. In order to do this, there need to be local managers installed who would, in turn, certify that their respective entities have capabilities to report on arrangements.
The head of tax must have complete control and updated knowledge on the chain of intermediaries, their hierarchy and efficacies on reporting arrangements.
It is a healthier and a sound practice to request your tax advisor to inform, well in advance, on the information that is scheduled to be filed at a given date, so as to ensure that the information provided for filing is correct in all respects.
Identifying an arrangement
The characteristic features in the directive are framed in such a way that it is not easy to assess as to what arrangements are included in the reporting obligations.
If there are tax payers/intermediaries in different countries, the cross border arrangement could be reported in several EU countries, accordingly.
The head tax functionary however, is the overall personnel who will manage the intermediaries, their reporting, complexities and nuances, based on domestic peculiarities so as to bring up a standardized uniform reporting arrangement.
Acquiring right information
Amongst all this, the head of tax functionary has the onerous task of getting the right information from the intermediaries It is therefore extremely important for the head of tax to look at each jurisdiction separately, assess their peculiarities and see how they align well with the overall scheme of things, in so far as the reporting arrangements are concerned. While doing this, the head of tax, may, if necessary guide and support the member intermediaries and tax payers, by giving suitable examples relevant and specific to each of them.
Many groups follow decentralized method of tax payments, with negligible interaction by the head of tax.
In MDR reporting, however, the centralized working is desirable as many decisions would have to be taken at the apex or group level; otherwise the decentralized reporting without any direction or guidance on the overall rules and ethics, will render them ineffective.
In our next blog, the last one in this series, we look to guide you towards the process you may need to undertake as you reach the end of completing this report. We will be addressing the changes you may need to undertake in your organization and some of the key decisions you may need to take in order to ensure that you are prudent in your mandatory reporting to the government.