European rules require intermediaries – advisers, accountants, banks and lawyers among them – to report certain cross-border arrangements bearing defined hallmarks to the tax authorities. This article does not deal with the fiscal merits of such arrangements; our firm does not advise on cross-border tax structuring. It deals with the questions that arise around the obligation itself: who carries it, what happens when it is missed, and how it interacts with professional confidentiality.
Who carries the obligation
The duty falls in the first place on the intermediary who designs, markets, organises or makes available a reportable arrangement, or who assists in its implementation. Where there are several intermediaries, each is in principle obliged to report unless it can show that another has already done so – which is why the evidence that a report was filed, and by whom, needs to be kept rather than assumed.
Where no intermediary is obliged to report, or where the intermediary invokes a legal professional privilege, the obligation shifts to the taxpayer. That shift is the point at which most disputes between adviser and client begin, because the client discovers the duty late and the deadlines are short.
Professional privilege
Intermediaries covered by a legal professional privilege – in the Netherlands, lawyers and civil-law notaries within the scope of their privilege – are relieved of the duty to report, but not of the duty to notify. They must inform the other intermediaries involved, or the taxpayer, that the obligation has passed to them. Getting that notification right, in writing and in time, is what separates a privileged adviser who has complied from one who has not.
Consequences of failing to report
Non-compliance carries administrative penalties that can be substantial, and in serious cases the conduct falls within the scope of fiscal criminal law. Alongside the penalty sits a civil exposure: an adviser who failed to report, or failed to notify the client that the duty had shifted, may be liable to the client for the penalty the client then incurs.
That civil exposure is the reason the obligation matters even to advisers who are confident they fall outside it. The assessment of whether an arrangement is reportable is itself an act of professional judgement, and it should be recorded at the time, with reasons.
What to arrange contractually
Engagement letters should state expressly who assesses whether an arrangement is reportable, who files, what the client must provide and by when, and what happens if the client refuses to supply information. Where privilege applies, the notification obligation and its timing should be spelled out. These clauses cost nothing at the outset and decide liability afterwards.
Advice
We advise advisers and their clients on the contractual allocation of reporting duties, on professional liability arising from them, and on disputes about who should have filed. For the fiscal assessment of an arrangement itself, we work alongside a tax specialist. Please contact Law & More.
