The disclosure obligations under Directive 2018/822/EU (“DAC 6”) require taxpayers and intermediaries to identify and report potentially aggressive tax planning arrangements to the relevant tax authorities. These measures aim to combat tax avoidance and the abuse of tax legislation by imposing a formalized framework for assessing and disclosing cross-border arrangements.
To ensure consistent and objective application, DAC 6 sets out a series of predefined hallmarks—risk indicators that, when triggered, mandate reporting to the tax administration. This mechanism removes subjective interpretation by intermediaries or taxpayers and replaces it with a structured checklist to determine reportability.
Definition of a Cross-Border Arrangement
A cross-border arrangement subject to reporting under DAC 6 includes any scheme, arrangement, or project involving Italy and at least one foreign jurisdiction, provided that at least one of the following conditions is met:
- Not all parties to the arrangement are tax resident in the same jurisdiction;
- One or more participants are dual tax residents;
- A participant operates through a permanent establishment (PE) in another jurisdiction, and the arrangement relates to at least part of the PE’s activity;
- A participant performs activities in another jurisdiction without being resident or having a PE there;
- The arrangement may impact automatic exchange of information or the identification of beneficial ownership, particularly through opaque offshore structures.
Who Is Required to Report
DAC 6 obligations apply to both taxpayers and intermediaries.
- A taxpayer is any person implementing or benefiting from the cross-border arrangement.
- An intermediary is any person who designs, markets, organizes, or makes available for implementation a reportable cross-border arrangement or manages its execution.
This includes financial institutions (e.g. banks, asset managers, insurance companies), as well as professionals such as accountants, tax consultants, and legal advisors subject to anti-money laundering regulations.
Objective Reporting Criteria
To be reportable, a cross-border arrangement must satisfy the following:
- It is cross-border in nature;
- It meets at least one of the predefined hallmarks (A through E);
- It results in (or is expected to result in) a tax benefit in an EU Member State or a third country with which information exchange agreements are in place;
- For certain hallmarks, it must pass the “main benefit test.”
Categories of Hallmarks
Hallmarks are classified into five main categories:
- Category A – Generic hallmarks requiring the main benefit test;
- Category B – Specific hallmarks also requiring the main benefit test;
- Category C – Specific hallmarks related to cross-border transactions;
- Category D – Specific hallmarks relating to the automatic exchange of information and beneficial ownership;
- Category E – Specific hallmarks concerning transfer pricing.
From a transfer pricing standpoint, Category E includes indicators such as:
- Use of unilateral safe harbor rules;
- Transfer of hard-to-value intangibles;
- Intragroup cross-border transfers involving significant profit shifts.
Tax Benefit and the Main Benefit Test
For hallmarks in Categories A, B, C, and E, the reporting obligation arises only if the arrangement leads to a potential tax advantage.
Tax benefit includes:
- Reduction in taxable income or tax due;
- Claim for a tax refund;
- Elimination or reduction of withholding taxes;
- Long-term deferral of tax payment;
- Application of reliefs for double taxation.
The main benefit test is met if the tax benefit represents more than 50% of the combined financial and non-tax benefits arising from the arrangement.
Required Disclosures
If reportable, the following must be communicated to the Italian Tax Authority:
- Identification details of taxpayers and intermediaries (e.g. names, tax residence, group affiliation);
- Hallmarks triggering the reporting obligation;
- Summary and description of the arrangement;
- Relevant economic activities;
- Implementation timeline;
- Legal provisions involved;
- Arrangement value;
- Involved Member States and affected persons.
Filing Procedure and Deadlines
Disclosure must be filed within 30 days from the earliest of:
- The date the arrangement is made available for implementation;
- The date implementation begins;
- The date the intermediary provides assistance.
The filing is done electronically using the Italian Tax Authority’s Entratel or Fisconline platforms in XML format. An acknowledgment receipt confirming the filing’s acceptance or rejection is issued within five business days.
Final Remarks
DAC 6 introduces significant compliance challenges, especially for multinational groups engaging in cross-border transactions. From a transfer pricing perspective, particular attention must be given to arrangements involving intangibles, intercompany financing, and PE attribution.
Taxpayers and intermediaries must adopt robust internal controls to assess reportability and ensure timely disclosure. Failure to comply may result in severe penalties and reputational risk.
Proactive documentation, regular training, and the integration of DAC 6 assessments into the tax risk management framework are now essential components of a compliant transfer pricing strategy.
