Of the reporting regimes introduced over the past decade, DAC6 is the one that most reliably surprises groups that are not doing anything aggressive. It does not ask whether an arrangement is abusive. It asks whether the arrangement has certain features. A cross-border transaction becomes reportable because it displays a listed characteristic, not because an inspector has formed a view about it. That distinction is the whole of the regime, and failing to internalize it is why well-run groups discover, usually late in a transaction, that an unremarkable reorganization carried a filing obligation nobody had allocated.
What the regime actually is
DAC6 is the European directive on mandatory disclosure of cross-border arrangements, Council Directive (EU) 2018/822, which inserted the regime into the directive on administrative cooperation in the field of taxation, Directive 2011/16/EU. It is implemented in the Netherlands within the domestic legislation on international assistance in tax matters, in article 10h of the Wet op de internationale bijstandsverlening bij de heffing van belastingen, whose definitions in article 2d refer straight back to the directive. An arrangement is cross-border if it concerns either more than one member state or a member state and a third country and meets at least one of the conditions in Article 3(18) of the directive, the first of which is that not all participants are resident for tax purposes in the same jurisdiction. It becomes reportable when it contains at least one of the hallmarks listed in Annex IV. Each party that reports files in one member state, chosen by the order of connections in Article 8ab(3) for intermediaries and Article 8ab(7) for taxpayers, and the authority that receives the report passes the information specified in Article 8ab(14) automatically to the competent authorities of all other member states under Article 8ab(13), which in the Dutch act is article 6f.
Two practical consequences follow from that architecture. The first is that each report is filed once but the information travels everywhere; a filing made in the Netherlands reaches the tax authorities of every other member state, including those touched by the same arrangement. The second is that inconsistency is visible. Where two intermediaries in two member states describe the same transaction differently, or where one files and another concludes there is nothing to file, the divergence sits in the exchanged data. Both points argue for the same discipline: settle the description of a transaction once, centrally.
Hallmarks, and the two tiers within them
The hallmarks in Annex IV are grouped into five categories, lettered A to E. Category A covers generic features associated with, but not limited to, marketed arrangements: a condition of confidentiality about how the arrangement could secure a tax advantage, fees fixed by reference to the tax advantage or to whether one is actually obtained, and substantially standardized documentation or structure available to more than one taxpayer without a need for substantial customization. Category B covers specific structural features: contrived steps that consist in acquiring a loss-making company, discontinuing its main activity and using its losses to reduce tax; the conversion of income into capital, gifts or other categories of revenue taxed at a lower level or exempt; and circular transactions that round-trip funds, for instance through interposed entities without another primary commercial function or through transactions that offset or cancel each other. Category C addresses cross-border transactions: deductible payments between associated enterprises that meet one of the conditions in its first paragraph, the same depreciation claimed in more than one jurisdiction, relief from double taxation on the same item claimed in more than one jurisdiction, and transfers of assets where the amount treated as payable differs materially between the jurisdictions involved. Category D covers arrangements that may undermine the automatic exchange of financial account information or take advantage of its absence, and arrangements involving a non-transparent legal or beneficial ownership chain as that hallmark defines it. Category E is the transfer pricing category: the use of unilateral safe harbour rules, transfers of hard-to-value intangibles, and intra-group cross-border transfers of functions, risks or assets where the projected annual earnings before interest and taxes of the transferor or transferors, over the three years after the transfer, are less than 50 per cent of what they would have been without it.
The critical structural point is that these hallmarks operate on two tiers. Under Part I of Annex IV, category A, category B and points (b)(i), (c) and (d) of the first paragraph of category C may only be taken into account where the main benefit test is also satisfied, meaning that the main benefit, or one of the main benefits, a person may reasonably expect to derive from the arrangement is the obtaining of a tax advantage. Category D, category E, and the remainder of category C apply on their own terms, with no motive filter at all. A deductible cross-border payment to an associated enterprise that is not resident for tax purposes in any jurisdiction, or that is resident in a jurisdiction on a list of third-country jurisdictions assessed as non-cooperative by the member states collectively or within the OECD, can be reportable regardless of why the payment structure exists. A payment to a recipient in a jurisdiction with no corporate tax, or a rate of zero or almost zero, is different: that hallmark counts only where the main benefit test is met, and Annex IV adds that the low rate alone cannot be the reason for concluding that it is, a rule it applies equally to the conditions in points (c) and (d), where the payment benefits from a full exemption from tax or from a preferential tax regime in the jurisdiction where the recipient is resident for tax purposes.
This is precisely why ordinary groups are caught. The hallmarks that require no motive test are the ones that describe routine corporate life: the migration of a manufacturing or distribution function that takes the transferor’s projected earnings below the 50 per cent threshold, the transfer between associated enterprises of intangibles, or rights in them, for which no reliable comparables exist and whose projections or valuation assumptions are highly uncertain, a deductible intercompany payment into a jurisdiction that happens to be listed. Groups that have already worked through their withholding tax position on dividends, interest and royalties tend to spot the payment hallmarks early, because the conditional withholding regime has already forced them to map where their deductible outbound flows land.
Who has to report, and what privilege changes
The primary obligation falls on the intermediary. Article 3(21) of the directive defines that term through two limbs. The first captures the person who designs, markets, organizes or makes available for implementation a reportable arrangement, or who manages its implementation. The second captures anyone who provides aid, assistance or advice in relation to it, measured against what that person knew or could reasonably be expected to know. The second limb is the wider of the two, and it is the one that draws in advisers who did not conceive the transaction and would not describe themselves as its architects, although a person caught by it may show that it did not know and could not reasonably be expected to know that it was involved in a reportable arrangement. To be an intermediary at all, a person must also have one of four connections with a member state: tax residence there, a permanent establishment there through which the services on the arrangement are provided, incorporation in or governance by its laws, or registration there with a professional association related to legal, taxation or consultancy services.
Where several intermediaries are involved, each is in principle obliged to file under Article 8ab(9), and each is relieved only to the extent it holds proof that the same information has already been reported by another; the Dutch provision, article 10h(9), puts the burden on the intermediary to demonstrate it. That proof is a document, not an assumption. The common failure is a chain of parties each of whom believed a different party was filing.
Legal professional privilege does not extinguish the obligation; it relocates it. Article 8ab(5) allows member states to grant a waiver where filing would breach legal professional privilege under national law, and only to the extent that the intermediary operates within the limits of the national laws that define its profession. The Netherlands does so in article 10h(5) by applying article 53a of the Algemene wet inzake rijksbelastingen, which only ministers of religion, notaries, lawyers, doctors and pharmacists can invoke, on the ground that their position, office or profession binds them to secrecy, and only for what was entrusted to them, or communicated by them, in that capacity; a tax adviser who is none of these has no waiver under Dutch law. An intermediary relying on the waiver must notify its own client without delay, meaning the client if it is itself an intermediary or, failing that, the client that is the relevant taxpayer, of that client’s reporting obligations. That limit to the client follows the Court of Justice in Case C-694/20, Orde van Vlaamse Balies, which held Article 8ab(5) invalid in so far as its application had the effect of requiring a lawyer exempted by privilege to notify other intermediaries who were not its clients, and the amended directive now says the same. The duty then lies with the other intermediaries and, if there is no other intermediary, with the relevant taxpayer (in the Dutch act, article 10h(7)), who must report on its own account. The practical effect is that privilege makes it more likely, not less, that the obligation lands on the group itself. The same result follows where no adviser has any of the four connections with a member state that the definition requires, or where an arrangement was developed in-house and there is no intermediary at all. In each of those cases the taxpayer reports if it has one of the connections with a member state listed in Article 8ab(7), which the Dutch act mirrors for the Netherlands in article 10h(6), and where it has an obligation in more than one member state it files only in the one that comes first in that order (in the Dutch act, article 10h(8)); where there is more than one relevant taxpayer, Article 8ab(10), which the Dutch act follows in article 10h(10), places the obligation on the one that comes first in the list it sets, and any relevant taxpayer is relieved only to the extent that it holds proof, in accordance with national law, that the same information has already been filed by another relevant taxpayer.
Reporting is information, not confession
The most useful thing to say to a board is the simplest. A DAC6 report is a disclosure of facts within a defined window, which the directive sets at 30 days. For an intermediary under the first limb, and for a taxpayer that reports, it runs from the earliest of the arrangement being made available for implementation, being ready for implementation, or the first step in its implementation being taken; an adviser under the second limb has 30 days beginning on the day after it provided the aid, assistance or advice (Article 8ab(1) and (7)). It is not an admission that anything is wrong, it does not create a presumption of abuse, and it does not concede any position on the merits: Article 3(20) describes a hallmark as an indication of a potential risk of tax avoidance, not a finding. Nothing in the regime provides that a reported arrangement is thereby treated as ineffective, and equally, under Article 8ab(15), a tax administration’s failure to react to a reportable arrangement does not imply any acceptance of its validity or tax treatment.
A filing records what was done. It does not concede that it should not have been done.
The asymmetry is worth weighing. A report that turns out to have been unnecessary costs the effort of preparing it. A failure to report where an obligation existed exposes whoever held it, which may be the group itself, to penalties; in the Netherlands, article 11 of the act allows an administrative fine where the failure, or a late, incomplete or incorrect report, is due to intent or gross negligence. More corrosively, it invites an inspector to conclude that the group’s grasp of its own structure is weaker than its filings suggest. Where a hallmark is genuinely arguable, the disciplined answer is usually to report and to keep the reasoning that explains why the arrangement is nonetheless ordinary.
What an orderly group does about it
Very little of the work is technical. Most of it is allocation and record keeping, and it begins with mapping the intermediaries transaction by transaction. For each cross-border project that means identifying every person who could meet either limb of the definition, including advisers engaged by counterparties, and recording who is expected to file, done at the outset rather than at completion. The map then has to be backed by proof. Where reliance is placed on another party’s filing, obtain the reference number and hold it, because reliance without evidence is not an exemption.
Alongside that sits a single register: one record covering arrangements reviewed, hallmarks considered, the conclusion reached and who reached it. The entries showing why something was not reportable matter as much as the ones showing that it was, and both belong in the same place. Separately, the trigger dates have to be fixed. The window runs from events that occur inside the deal timetable, which need not coincide with signing or closing, and it can open before the group considers the transaction settled.
The remaining two steps put the allocation in writing and in one pair of hands. The obligation belongs in the engagement terms, and advisory contracts should state expressly who files, who notifies whom, and what happens where privilege applies. Beyond the contracts, it needs an owner: one named person in the group, usually the head of tax, with visibility over transactions initiated by operating subsidiaries rather than by the centre.
A reorganization that can turn out to be reportable
Consider a mid-sized industrial group consolidating its European distribution. Four national sales companies, each historically operating as a full-risk distributor, are converted into limited-risk distributors. Inventory ownership, credit risk and the customer contracts move to a Dutch BV, which becomes the European principal and holds the trademarks used in the region. The commercial rationale is real: one order book, one working capital pool, one set of terms. The group’s participations continue to fall within the participation exemption, transfer pricing documentation is prepared under article 8b, and remuneration for the converted entities is set by benchmarked routine returns. No tax advantage is being sought beyond the ordinary consequences of where functions now sit.
This can be reportable, and on more than one basis. The conversion is an intra-group cross-border transfer of functions, risks and assets, and it meets the category E hallmark on such transfers if the projected annual earnings before interest and taxes of the converted companies, over the three years after the transfer, are less than 50 per cent of what they would have been without it; that hallmark carries no main benefit test, so the question is answered by the group’s own projections. The transfer of the regional trademarks may separately engage the hard-to-value intangibles hallmark, if no reliable comparable exists and the projections or assumptions underpinning the valuation were highly uncertain when the transaction was entered into. If any converted entity is remunerated by reference to a unilateral safe harbour in its own jurisdiction, that is a further category E hallmark. None of these depends on motive, so the group’s commercial reasons are, for reporting purposes, beside the point. They remain entirely relevant to whether the pricing survives audit, which is a separate question and the one that actually matters.
The practical failure in transactions of this shape is rarely analytical. It is that the tax function reviews the arrangement for substance, pricing and operating model, satisfies itself on all three, and never asks the separate question of whether anyone has filed.
The proportionate view
DAC6 is best treated as an administrative discipline rather than a risk. It rewards groups that know the shape of their own structure and can describe it consistently; it punishes groups whose cross-border projects are assembled by different advisers who each assume someone else is holding the file. Keep a register, allocate the obligation in writing, report where the answer is uncertain, and the regime becomes unremarkable.
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This article is informational and does not constitute tax advice. Each engagement is subject to scope and applicable regulation.