DAC6: Mandatory Disclosure Rules, Hallmarks and Penalties

The DAC6 mandatory disclosure rules require intermediaries, and in some cases taxpayers, to report cross-border tax arrangements that show signs of aggressive planning to an EU national tax authority within 30 days of a trigger event. The regime was created by Council Directive (EU) 2018/822, the sixth amendment to the EU Directive on Administrative Cooperation, and the disclosures feed a central directory that every member state’s tax authority can query.¹ If you advise on or benefit from a structure that touches two or more jurisdictions and carries any of the listed hallmarks, the rules probably reach you.

Who Has to File

The obligation sits first with intermediaries. The directive defines an intermediary broadly as anyone who designs, markets, organizes, or makes an arrangement available for implementation, and anyone who provides aid or advice in connection with those activities.² That covers two practical groups.

Promoters conceive of or market the arrangement. They see how the structure works and almost always carry the reporting obligation. Service providers, meaning accountants, tax advisors, and similar professionals, only become intermediaries if they knew, or could reasonably have been expected to know, that they were involved in a reportable arrangement. A service provider who can demonstrate a genuine lack of that knowledge falls outside the obligation.

Where no intermediary exists, or where every intermediary sits outside the EU, the obligation shifts to the relevant taxpayer, meaning the person or entity that benefits from the arrangement.³ In-house tax structuring, or advice from a non-EU firm, will typically leave the client on the hook.

When Several Intermediaries Are Involved

A single arrangement only needs to be reported once. An intermediary can claim exemption by demonstrating that another intermediary has already filed. When one intermediary has potential obligations in more than one member state, the directive sets a priority order: report where you are tax-resident; failing that, where you have a permanent establishment through which you provided the services; failing that, where you are incorporated or governed.²

Which Arrangements Are Reportable

An arrangement becomes reportable when it displays one or more hallmarks listed in Annex IV of the directive. There are five categories, and they split into two operational groups: those that only bite when combined with the Main Benefit Test, and those that trigger reporting on their own.⁴

Hallmarks Tied to the Main Benefit Test

Categories A, B, and part of C only trigger reporting if the arrangement also passes the Main Benefit Test. That test asks whether obtaining a tax advantage was one of the main expected benefits of the arrangement, judged against what a reasonable person would conclude from all the facts. A tax benefit that is incidental to a genuine commercial purpose does not meet the test.

Category A covers generic hallmarks: confidentiality clauses that bind the taxpayer, fees that depend on the size of the tax benefit, and standardized products offered to multiple taxpayers without significant customization. Category B targets acquiring a loss-making company primarily to use its tax losses, converting taxable income into a lower-taxed category, and circular transactions where funds pass through intermediary entities and return close to their starting point. Category C, part 1 covers deductible cross-border payments to a related entity in a zero-tax or near-zero-tax jurisdiction, or to a recipient that is not tax-resident anywhere.²

Hallmarks That Trigger Reporting on Their Own

The remaining hallmarks are treated as inherently risky enough that commercial rationale does not save them.

Category C, part 2 catches arrangements that claim depreciation deductions in more than one jurisdiction for the same asset, or double-taxation relief in more than one state for the same income. Category D covers arrangements designed to circumvent reporting under the Common Reporting Standard for automatic exchange of financial account information, along with opaque ownership chains that hide beneficial owners. Tactics here include moving accounts to jurisdictions without exchange agreements, reclassifying income into categories outside automatic reporting, and using shell entities with no real economic substance. Category E covers transfer pricing, specifically the use of unilateral safe harbor rules and the transfer of hard-to-value intangible assets between related companies where reliable comparables do not exist and projected financial flows are highly uncertain at the time of transfer.²

The 30-Day Clock and the Central Directory

The filing deadline is 30 days, counted from the earliest of three trigger events: the day after the arrangement is made available for implementation, the day after it is ready for implementation, or the day the first step in implementation is actually taken.¹ Whichever event happens first starts the clock. An intermediary who markets a structure cannot wait for the client to sign.

Once a national tax authority receives a disclosure, it must upload the information to the EU central directory within one month after the end of the quarter in which it was filed. A disclosure filed in January must appear in the directory by the end of April.¹ Every member state’s tax authority can access the directory. The European Commission has limited access for monitoring; nothing in the directory is public.

Marketable Arrangements Need Quarterly Updates

The directive distinguishes marketable arrangements (ready-made products that do not need significant customization) from bespoke arrangements (structures built for a specific client). Marketable arrangements carry a periodic obligation: intermediaries who promote or manage them must file an updated report every three months, covering new taxpayers who have entered the arrangement and any new information about implementation dates or affected member states.² Bespoke arrangements need only one disclosure.

What Goes in the Disclosure

Article 8ab(14) of the directive lists the data points every filing must contain.² In practice, the disclosure needs to cover:

Names, dates of birth, tax residency, and tax identification numbers for every intermediary and relevant taxpayer, plus identification of any associated enterprises.
The specific hallmarks from Annex IV that make the arrangement reportable.
A summary of the business activities or transactions involved, in enough detail for the tax authority to understand the structure without revealing protected commercial secrets.
The date the first step was taken or is expected to be taken.
The domestic tax provisions the arrangement relies on.
The financial value of the arrangement.
Every EU member state where a relevant taxpayer is resident or that is likely to be affected, along with any other persons in member states who may be impacted.

Filings go through digital portals run by each member state’s tax authority, using standardized electronic fields designed for compatibility with the EU-wide exchange system.

Penalties

The directive requires member states to impose penalties for failure to report but does not set amounts. Each country picks its own structure, and the spread is wide. Germany caps penalties at €25,000 per infringement. Italy’s range for failure to report runs from €3,000 to €31,500. Some member states allow fines exceeding €1 million in the most serious cases, and others cap at €5,000 per violation.

Penalties can fall on the intermediary, the taxpayer, or both, depending on who carried the obligation and how the failure occurred. Several member states also distinguish between not reporting at all, filing late, and filing an incomplete or inaccurate disclosure, with separate scales for each. Enforcement varies by country, but the financial exposure in the aggressive jurisdictions dwarfs the cost of compliance.

Legal Professional Privilege and the DAC8 Fix

Article 8ab(5) of the directive lets member states waive the reporting obligation for intermediaries whose national law protects lawyer-client communications. A lawyer whose duty of professional secrecy would be breached by filing can claim the waiver.² The privilege varies by country and only applies where national law specifically protects the professional’s communications. When it applies, the reporting obligation does not vanish; it moves to the next person in the chain.

The original directive required a lawyer claiming the waiver to notify any other intermediary of that intermediary’s resulting obligation, even intermediaries who were not the lawyer’s client. In December 2022, the Court of Justice of the European Union ruled in Orde van Vlaamse Balies (Case C-694/20) that requiring notification to non-client intermediaries violates Article 7 of the EU Charter of Fundamental Rights, because the notification itself reveals the substance of the legal advice. The court also made clear that the protection covers only lawyers and other professionals specifically authorized under national law to provide legal representation, not accountants or tax advisors who happen to hold some confidentiality obligation.⁵

DAC8, Council Directive (EU) 2023/2226, rewrote Article 8ab(5) to fit the ruling. A lawyer who claims the privilege now notifies only their own client of the client’s reporting obligations. If that client is itself an intermediary, the obligation passes to the client; if there is no other intermediary, the notification goes to the relevant taxpayer.⁶ The notification flows only through the lawyer-client relationship.

What DAC6 Does Not Cover

DAC6 only applies to arrangements involving at least one EU member state. Two other regimes sit next to it and are easy to confuse with it.

The United Kingdom replaced DAC6 with its own Mandatory Disclosure Rules on March 28, 2023.⁷ The UK regime is narrower in subject matter: it targets only arrangements that circumvent the Common Reporting Standard and structures that use opaque offshore arrangements to hide beneficial owners. The generic, specific, cross-border payment, and transfer pricing hallmarks that DAC6 catches under Categories A, B, most of C, and E fall outside it. Its geographic reach is wider, though, because it applies regardless of which jurisdictions are involved. The 30-day deadline mirrors DAC6. Penalties start at up to £5,000 per failure, with daily penalties up to £600 and reaching as high as £1 million in serious cases.⁸

The United States has no DAC6 equivalent. It runs a separate reportable transaction regime: taxpayers who participate in listed transactions, confidential transactions, transactions with contractual fee protections, loss transactions above set thresholds, or transactions of interest must file Form 8886 with their return.⁹ Failure triggers a penalty of 75 percent of the tax decrease resulting from the transaction, with individual penalties running from $5,000 to $100,000 for listed transactions and $5,000 to $10,000 for others; for entities the range is $10,000 to $200,000 for listed transactions and $10,000 to $50,000 otherwise.¹⁰ The US regime places the obligation on the taxpayer rather than on intermediaries, though material advisors have parallel obligations under separate rules.

1
European Commission. DAC6 – Taxation and Customs Union
2
EUR-Lex. Council Directive (EU) 2018/822
3
Taxation and Customs Union. Directive on Administrative Cooperation
4
EUR-Lex. Council Directive (EU) 2018/822 of 25 May 2018
5
EUR-Lex. Judgment in Case C-694/20
6
EUR-Lex. Council Directive (EU) 2023/2226
7
GOV.UK. Mandatory Disclosure Rules (MDR)
8
Legislation.gov.uk. The International Tax Enforcement (Disclosable Arrangements) Regulations 2023
9
Internal Revenue Service. About Form 8886, Reportable Transaction Disclosure Statement
10
Internal Revenue Service. Penalty for Failure to Include Reportable Transaction with Return