The concept of arrangement under DAC6 provisions is a very broad one and the DAC6 Directive does not include a clear definition for this term. First of all, the arrangements targeted by the DAC6 Directive are the ones that implement or conduct to aggressive tax planning structures, as these are referred in the DAC6 Directive foreword: “aggressive tax planning”, “aggressive tax practices”, “aggressive tax arrangements”. However, given the fact that the definitions of arrangement and aggressive tax planning are not provided in the DAC6 provisions, it may be the case that legitimate transactions may be reportable under a specific category of hallmarks, even if these does not present a real threat as regards aggressive tax planning.
In those jurisdiction where the definition of the cross-border arrangements is not provided in the guidelines issued by the relevant tax authorities, a good starting point in understanding the “arrangement” concept can be found at point 4.3 in the Commission recommendation of 6 December 2012 on aggressive tax planning. According to this paragraph: “[…] an arrangement means any transaction, scheme, action, operation, agreement, grant, understanding, promise, undertaking or event. An arrangement may comprise more than one step or part.”

However, in order to support the relevant intermediaries and taxpayers to correctly report under the DAC6 transposed provisions, different EU jurisdictions have included in their DAC6 guidance some clarifications regarding the meaning of the term arrangement. For example:

•  the Swedish DAC6 guidance also includes some recommendation for the interpretation of the term arrangement. The Swedish guidance mentions the fact that the concept is very broad and given the fact that it is not defined in the DAC6 regulations, certain guidance may be found in OECD Model Rules for Mandatory Disclosure to address arrangements to avoid CRS (page 16 “[…] “CRS Avoidance Arrangement” is any Arrangement for which it is reasonable to conclude that it is designed to circumvent or is marketed as, or has the effect of, circumventing CRS Legislation or exploiting an absence thereof") and also in the Commission's recommendation of 6 December 2012 on aggressive tax planning, paragraph 4.3.

•   the Belgian DAC6 guidance (i.e. “FAQ on DAC6 – Reporting of cross-border arrangements”) provides some examples regarding the interpretation of the term arrangement: “a restructuration of a company”, “a merger, absorption or a business split”, “moving a company”, “establishment of a subsidiary”, “the conclusion of an agreement”, “the conclusion of an agreement for life insurance”.

•  the Irish DAC6 guidance provides clarifications regarding the arrangement concept: “The term “arrangement” is broadly defined and includes all types of arrangements, transactions, payments, schemes and structures, whether or not legally enforceable. For instance, a verbal agreement may constitute an arrangement.” Also, the Irish guidance clarifies that the term arrangement comprise more than one step or part and a series of arrangements: “For instance, one arrangement could comprise: entering into a loan agreement; the advance of the loan, successive payments of interest on the loan and the repayment of the loan principal."

•  the UK DAC6 guidance provides a definition of the arrangement in section 84 of the Finance Act as is including: “any scheme, transaction, or series of transactions”. It is also mentioned that the definition provided by the UK tax authorities for arrangement is not exhaustive and so the scope of what could be an arrangement is potentially broad. This ensures the fact that all relevant arrangements are indeed reportable. Also, it is recommended to analyze the arrangement holistically, rather than analyzing series of small steps, fact that is suggested in the expression “series of transactions”. The UK guidance also clarifies that if a pre-existing arrangement is extended, this will be not be normally viewed as a new arrangement, unless there is some material change to the arrangement.

In conclusion, the definitions implemented in a particular jurisdiction must be analyzed in order to ensure a correct compliance process, because there may be divergent opinions among Member States regarding the definition of terms with a direct impact on the reporting process.

More details on MDR implementation across EU Member States & UK on dac6guide.eu