On March 11, 2025, the Council of the European Union reached a political agreement on the ninth amendment to the Directive on Administrative Cooperation in taxation, commonly referred to as “DAC9”. This amendment aims to streamline and simplify tax reporting obligations for multinational enterprise groups (MNEs) and large-scale domestic groups (LSDGs) operating within the EU.
Key Objectives of DAC9
DAC9 is designed to complement the existing Pillar Two Directive, which ensures a global minimum tax rate of 15% for MNEs and LSDGs. The primary goal of DAC9 is to facilitate compliance by introducing a centralized filing system. This allows MNEs to submit a single top-up tax information return at the group level, rather than multiple filings across different EU Member States.
Standardized Reporting Framework
To achieve uniformity and reduce administrative burdens, DAC9 introduces a standardized form aligned with the Global Anti-Base Erosion (GloBE) Information Return developed by the OECD/G20 Inclusive Framework. This form mandates MNEs and LSDGs to report specific tax-related information in a consistent format, simplifying the filing process and enhancing the efficiency of information exchange among EU tax authorities.
Information Exchange Mechanism
Beyond standardized reporting, DAC9 establishes a framework for the automatic exchange of tax information between Member States. This system ensures that once an MNE submits its top-up tax information return in one Member State, the relevant data is disseminated to tax authorities across other Member States where the MNE operates. This approach promotes transparency and reduces the need for redundant filings.
Implementation Timeline
Member States are required to transpose DAC9 into their national laws by December 31, 2025. MNEs are expected to file their first top-up tax information returns by June 30, 2026, as stipulated under the Pillar Two Directive. Subsequently, tax authorities must exchange this information with their counterparts in other Member States by December 31, 2026.
Implications for Multinational Enterprises
The introduction of DAC9 signifies a substantial shift towards simplifying tax compliance for MNEs within the EU. By centralizing the filing process and standardizing reporting formats, MNEs can anticipate reduced administrative burdens and enhanced clarity in their tax obligations. Furthermore, the automatic exchange of information fosters a more transparent tax environment, aligning with global efforts to combat tax avoidance and ensure fair taxation.
Practical Steps for Compliance
MNEs should proactively assess their current tax reporting processes to align with the forthcoming DAC9 requirements. This includes:
- Identifying the Appropriate Filing Entity: Determining whether the ultimate parent entity or a designated subsidiary will be responsible for submitting the centralized top-up tax information return.
- Adapting to the Standardized Form: Ensuring that internal tax reporting systems can capture and report data in accordance with the new standardized format introduced by DAC9.
- Engaging with Tax Authorities: Establishing communication channels with the tax authorities in the Member State of filing to ensure compliance and address any uncertainties during the transition period.
By undertaking these steps, MNEs can effectively navigate the changes introduced by DAC9 and maintain compliance with EU tax regulations.
Conclusion
DAC9 represents a pivotal development in the EU’s efforts to harmonize tax reporting obligations for multinational enterprises. The directive not only simplifies compliance but also strengthens the framework for tax transparency and cooperation among Member States. As the implementation deadline approaches, it is imperative for MNEs to adapt their tax strategies and reporting mechanisms to align with the new requirements, thereby ensuring seamless compliance and contributing to a fairer tax landscape within the EU.