Ireland issues guidance on “main benefit test” under DAC6 legislation

Irish Revenue has published Revenue e-Brief No. 029/20 pertaining to the “main benefit test” used in the domestic law implementing the EU Directive on reportable cross-border tax arrangements (commonly referred to as DAC6).

Revenue e-Brief No. 029/20 notes that Revenue Tax and Duty Manual Part 33-01-01 has been updated to include a reference to the EU mandatory disclosure regime, which comes into operation on July 1, 2020, and includes a “main benefit test.” 

According to the updated Manual, disclosure of a transaction under the mandatory disclosure regime is, in some cases, linked to what an “informed observer” would conclude.

“For example, a loss scheme is disclosable if an informed observer could reasonably conclude that the creation of an income tax loss is a main outcome of the transaction. This test is objective in that what the taxpayer actually intended is irrelevant. What an informed observer would reasonably conclude, from the facts, is the test in law,” the Manual notes.

Revenue e-Brief No. 029/20 states that a Revenue Tax and Duty Manual setting out guidance on the practical operation of the mandatory disclosure regime will be issued in due course.

See Revenue e-Brief No. 029/20