Imagine that you are travelling around Europe again. No masks. No COVID. Sound good? Now imagine that during such trip you are obliged to report any actions with possible unlawful intention as one of its main purposes. And if you fail, you are fined. Because during such trip you are not only a citizen, you are also a police officer and it was not your choice.
Feel uncomfortable? Welcome to the reality! It is actually happening today, in the European Union. Any actions perceived to have as one of their main purposes the reduction or postponement of taxes due by the tax payer or another entity, in the present or in the future, in the country or abroad, are to be reported. Full stop.
And more: the report will cover any steps taken in 2018. In some countries, even professionals with a legal privilege (like lawyers) must report such potentially unlawful actions. And it is understood that due to the difficulties and subjectivity of the actual application of the novel regime, intermediaries are encouraged to overreport. Does it look like Checkpoint Charlie seen from East Berlin? For me it does.
Some EU countries enacted laws and guidelines with some anticipation (like the Netherlands). Others shifted the duty (to self-incriminate) to taxpayers, in case lawyers are not required to disclose (like Germany) and, considering the traumas of COVID, others postponed the first disclosure dates (but not the events subject to disclosure – those starting on or after June 25, 2018).
Sadly, in Portugal like in Poland, lawmakers went beyond the EU requirements (Council Directive (EU) 2018/822, of 25 May 2018) and decided the following:
Because of his (understandable) doubts, the President of the Portuguese Republic took some time to approve the new law. In fact, it was due to be published by the end of 2019, but the Law was only approved by the Parliament on May 28, 2020 and was only published almost two months later (on the 21 July), thus after the date it was supposed to enter into force (1 July). Furthermore, no one knows yet if the reporting deadlines will be extended by six months (such as in the Netherlands or the UK) or not (like in Germany or Finland). And all this despite the fact the disclosure forms (maybe to be named Catch-22) are not yet available.
Thus, DAC-6 is in force in Portugal since July 22, 2020. It was supposed to establish two different reporting periods, which was already complex enough, namely, because the Constitutional Court will be asked, at least, to decide:
But in real life, things tend to be even more complex, especially if a six-month delay (up to the beginning of 2021) will be implemented.
In such case there will be four different reporting periods:
Since penalties are very significant with respect to each potentially reportable arrangement (requiring a subjective judgement), the consequences for taxpayers can be enormous as well as indemnities to be requested to over reporting intermediaries. The breach to the fundamental freedoms is also evident. Thus, strong civil, tax, administrative and criminal litigation will arise, causing serious challenges to tax payers, lawyers, notaries, consultants, accountants, advisers, financial institutions, family and trust offices, just to name a few.
Finally, if we add to this nightmare scene the new trend to consider any potential breach of a tax law (including ancillary duties) or any tax planning exercise as a tax fraud (with connected money laundering), then we shall conclude behind any reasonable doubt: the tax ocean has never been so dangerous to navigate.