DAC 7 – European Commission publishes an implementing regulation on Effective Qualifying Competent Authority Agreements

On 13 April 2023, the European Commission published an implementing regulation on the assessment and determination of equivalence of information in an agreement between the competent authorities of a Member State and a non-Union jurisdiction (‘Implementing Regulation’). The Implementing Regulation was published to allow for the application of an Effective Qualifying Competent Authority Agreement (‘EQCAA’) as defined by EU Directive 2021/514/EU, amending Directive 2011/16/EU (‘DAC7’) on administrative cooperation in the field taxation, which was transposed into domestic legislation by way of Legal Notice 8 of 2023.

EQCAAs in DAC7

An EQCAA as defined by DAC7 is an agreement between the competent authorities of a Member State (‘MS’) and a non-Union jurisdiction that requires the automatic exchange of information equivalent to that required by the Reporting Requirements imposed upon a Reporting Platform Operator (‘RPO’) in a MS.

Terms to be assessed and substantial differences

Essentially, all relevant definitions in DAC7 need to be incorporated in the legislation of a non-Union jurisdiction for the purposes of an EQCAA, which shall be assessed by the European Commission to determine their equivalence in accordance with the Implementing Regulation. However, the following two distinctions are to be noted:

1. The definition of an RPO stipulates that where a non-Union jurisdiction does not consider an RPO to include a Platform Operator that facilitates the provision of relevant activities for which, over the previous calendar year, the aggregate consideration at the level of the platform is less than €1 million or, less than an amount approximately equivalent to €1 million in the local currency of that jurisdiction, a determination of equivalence shall only apply to RPOs as defined in the national law of the relevant non-Union jurisdiction.
2. The definition of a relevant activity provides that where one of the listed relevant activities in DAC7 is excluded, a determination of equivalence shall only apply to information in relation to a relevant activity as defined in the national law of that non-Union jurisdiction.

Effective implementation of rules and procedures by non-Union jurisdictions

The European Commission shall assess the rules and administrative procedures laid down in the national law of a non-Union jurisdiction and pursuant to an EQCAA, shall ensure the effective implementation and compliance with the following rules and procedures and their equivalence with DAC7:

• Rules to enforce the collection and verification requirements in terms of the relevant due diligence procedures;
• Rules requiring RPOs to keep records of the steps undertaken and any information relied upon for the performance of the due diligence procedures and reporting requirements and adequate measures to obtain those records;
• Administrative procedures to verify compliance of RPOs with the due diligence procedures and reporting requirements; and
• Administrative procedures to follow up with an RPO where incomplete or inaccurate information is reported.

The Implementing Regulation may be accessed here.