DAC 4 - Automatic Exchange of Information on the Country-by-Country Report

Legal Overview:

DAC 4 refers to the EU Council Directive 2016/881, which mandates the automatic exchange of country-by-country (CbC) reports among EU tax administrations.  The aim is to provide such tax administrations with comprehensive and relevant information on the global allocation of income, taxes paid and economic activity among the jurisdictions within which Multinational Enterprises (MNEs) operate.  This mandatory automatic exchange of CbC Reports between Member States should in each case include the communication of a defined set of basic information that would be accessible to those Member States, including information pertaining to their revenue, profit before tax, income paid and accrued, number of employees, stated capital, retained earnings, and also tangible assets other than cash or cash equivalents.  Finally, MNE Groups are to identify each entity within the group doing business in a particular tax jurisdiction and provide an indication of the business activities in which each entity engages.

DAC 4 came into force, whereby on 25 May 2016 Council Directive 2011/16/EU (‘Directive on Administrative Cooperation’) was amended by Council Directive 2016/881/EU (‘DAC 4’) regarding the mandatory automatic exchange of information in relation to CbC Reporting.  DAC 4 was then implemented into Maltese legislation on 5^th June 2017, by virtue of LN 400 of 2016, amending S.L. 123.127 Cooperation with Other Jurisdictions on Tax Matters Regulations. 

Moreover, the rules for the automatic exchange of information as per DAC4 are also in line with international developments and are based on the OECD’s Action 13 of the Base Erosion and Profit Shifting Project.  In this respect, Malta has signed the OECD’s Multilateral Competent Authority Agreement (MCAA) on the Exchange of CbC Reports on the 26^th of January 2017 and as a signatory to this MCAA, Malta is committed to extend its cooperation to exchanging CbC reports also with non-EU jurisdictions.

CbC Registration:

Ultimate Parent Entities [or other Constituent Entities being the reporting entity] subject to submitting the CbC report in Malta, are required to notify the Commissioner for Tax and Customs of such obligation and are requested to apply by sending an email to [email protected]. Reference is made to section 7 of the guidelines for further details on such procedure.

CbC Notification Letter:

Constituent Entities of an MNE group which are resident in Malta are obliged to notify the Commissioner for Tax and Customs on whether they are required to submit the CbC Report in Malta or if not, in which jurisdiction such report will be submitted, as per parts 3 and 4 of Section II of Annex III to the Cooperation Regulations. Reference is made to section 7 of the guidelines for further details on such procedure.

Deadlines:

A Maltese Reporting Entity should file the CbC Report within 12 months of year end of the MNE Group.

A Maltese Constituent Entity of a MNE Group that is not the Reporting Entity should file the CbC Notification Letter by the statutory tax return date of the respective fiscal year.

Guidelines:

For further guidance on the above, kindly refer to the Guidelines for the implementation of the EU Council Directive 2016/881/EU of 25 May 2016 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation (DAC4) in Malta and the 2015 Final Report on Action 13 of the OECD/G20 Base Erosion and Profit Shifting Project (Version 7.1)

Contact:

For further information kindly contact us at [email protected]