DAC3

Background

 An advance cross-border tax ruling is a confirmation or assurance that tax authorities give to taxpayers on how their tax will be calculated in a cross-border situation before the transaction takes place. Similarly, an advance pricing arrangement determines in advance of cross-border transactions an appropriate set of criteria between associated enterprises (i.e. group companies) for the determination of transfer prices or determines the attribution of profit to a permanent establishment.

By providing certainty for business, clarification of tax law for taxpayers through a Ruling or APA can encourage investment and compliance with the law and can therefore be conducive to the objective of further developing the single market in the Union on the basis of the principles and freedoms underlying the Treaties. 

However, Rulings and APAs concerning tax-driven structures have, in certain cases, led to a low level of taxation of artificially high amounts of income in the country issuing, amending or renewing the advance ruling and left artificially low amounts of income to be taxed in any other countries involved. Accordingly, DAC3 provides a transparency tool for Member State tax authorities to combat abusive use of cross-border Rulings and APAs. 

Scope

The scope of cross-border Rulings and APAs exchanged between Member States is very broad. Any Ruling issued by a Member State, as long as it is defined as cross-border under DAC3, should be exchanged irrespective of the subject of the rulings. In addition, all cross-border Rulings and APAs are exchanged irrespective of whether the related parties, for example other group companies like their Parent Company, to such Rulings and APAs are resident inside or outside the EU. 

In terms of the information exchanged on the Rulings and APAs Article 8a of  DAC3 provides for the communication of basic features of the Rulings and APAs, including the identity of the beneficiary, a summary of the contents (with a description of the relevant business activities and transactions that could help assess the tax risk) and other details, such as the date of issuance or renewal, the duration and the amount of the transactions. 

Until a 2023 amendment to the DAC (‘DAC8’), cross-border rulings concerning only natural persons were explicitly excluded from the exchange. The DAC8 amendment, introduced AEOI for the following rulings concerning natural persons when:

• the amount of the transaction or series of transactions of a cross-border ruling exceeds EUR 1 500 000 (or the equivalent amount in another currency); or
• if the cross-border ruling determines whether a person is or is not resident for tax purposes in the EU country issuing the ruling .

These new DAC8 provisions will concern only cross-border rulings issued, amended, or renewed after January 2026. 

Information on the content of bilateral or multilateral rulings and APAs with third countries need not be included in the DAC3 Central Directory where the disclosure to third parties is not established by the arrangement. However, the Ruling or APA with third countries can be communicated to other Member States through SEOI (‘Spontaneous Exchange of Information’).

Reporting of  DAC3 AEOI information

DAC3 established a Central Directory database for storing AEOI information on Rulings and APAs, which all Member States could access, ensuring better coordination and reducing the administrative burden on tax authorities. The DAC3 Central Directory ensures that Member State tax authorities have all the information available on Rulings and APAs, which ensures swift and coordinated action between Member State tax authorities to combat tax avoidance, aggressive tax planning and to combat harmful tax competition. 

Rulings and APAs issued as from 1 January 2017 needed to be registered in the DAC3  Central Directory within 3 months following the end of the half of the calendar year in which the agreement has been signed. For example, Rulings and APAs issued in March 2017 should be registered by 30 September 2017 at the latest in the DAC3 Central Directory.

There is no public disclosure of the information in the DAC3 Central Directory and it is only accessible to the relevant competent authorities of the Member States. The European Commission has limited access to the database for monitoring purposes only.

International

In order to provide for tax transparency at international level, the OECD BEPS Action 5 framework (OECD/G20 Base Erosion and Profit-Shifting Project) has similar provisions to DAC3. By spontaneous exchange of information provisions, OECD member jurisdictions, which include EU Member States, send information to ‘concerned jurisdictions’ for the following six categories of rulings: 

(i) rulings relating to preferential regimes;

(ii) unilateral APAs or other cross-border unilateral rulings in respect of transfer pricing;

(iii) cross-border rulings providing for a downward adjustment of taxable profits;

(iv) permanent establishment (PE) rulings; 

(v) related party conduit rulings; 

and (vi) any other type of ruling agreed by the OECD Forum on Harmful Tax Practices (‘FHTP’) that in the absence of spontaneous information exchange gives rise to BEPS concerns.

‘Concerned jurisdiction’ are defined as: :

1. The countries of residence of all related parties with which the taxpayer enters into a transaction for which a ruling is granted, or which gives rise to income from related parties benefiting from a preferential treatment (this rule also applies in a PE context); and
2. The residence country of the ultimate parent company and the immediate parent company.

In the case of DAC3 AEOI Member States receive information on all cross-border Rulings and APAs issued by a Member State, irrespective of the jurisdiction of related parties to the Ruling or APA. This includes, for example, a cross-border ruling issued by a Member State to a taxpayer which has an Ultimate Parent Company resident outside the EU.

Legal texts

Council Directive 2015/2376/EU of 8 December 2015 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation

Statistics to be provided under DAC3 by Member States: Commission Implementing Regulation (EU) 2018/99 of 22 January 2018