Chapter 1: Obligations of taxpayers

For the application of III of Article 1649 AD, the principal advantage criterion and the markers of cross-border arrangements subject to a reporting obligation are defined as follows:

I.-General markers falling under category A mentioned in A of II of this article and specific markers falling under category B mentioned in B of the aforementioned II as well as i of b and c and d of 1° of category C mentioned in C of the aforementioned II, may only be taken into account when they meet the criterion of principal benefit.

This criterion is met if it is established that the main advantage or one of the main advantages that a person may reasonably expect to derive from a scheme, taking into account all the relevant facts and circumstances, is the obtaining of a tax advantage.

In the case of a marker falling under 1° of the aforementioned category C, the presence of the conditions set out in i of b or in c and d of 1° of that category, does not in itself constitute a reason to conclude that a device meets the principal advantage criterion.

II.-A.-A device includes a general marker related to the principal benefit criterion or "Category A marker", when it has one of the following characteristics:

1° The taxpayer concerned or a participant in the scheme undertakes to comply with a confidentiality clause under which he may be asked not to disclose to other intermediaries or to the tax authorities how the scheme could provide a tax advantage;

2° The intermediary is entitled to charge fees, interest or remuneration to finance the costs and other expenses, for the scheme and these fees, interest or remuneration are set by reference :

a) The amount of the tax benefit arising from the scheme; or

b) The fact that a tax benefit actually arises from the scheme. This may include an obligation on the intermediary to reimburse fees in part or in full if the expected tax benefit arising from the scheme has not been fully or partially generated;

3° The scheme whose documentation and/or structure are largely standardised and which is available to more than one taxpayer concerned without needing to be substantially adapted in order to be implemented.

B.-A device includes a specific marker related to the principal benefit test, or "Category B marker", where it has any of the following characteristics:

1° A participant in the scheme artificially takes steps which consist in acquiring a loss-making company, terminating the principal activity of that company and using the losses of that company to reduce its tax burden, including by transferring those losses to another jurisdiction or accelerating the use of those losses ;

2° It has the effect of converting income into capital, donations or other categories of revenue that are taxed at a lower level or are not taxed;

3° It includes circular transactions resulting in a "carousel" of funds, namely by means of interposed entities without a primary commercial function or transactions that offset or cancel each other out or have other similar characteristics.

C.-A device includes a specific marker related to cross-border transactions, or "Category C marker", when it has one of the following characteristics:

1° It provides for the deduction of cross-border payments made between two or more associated enterprises and at least one of the following conditions is met:

a) The recipient is not resident for tax purposes in any tax jurisdiction;

b) Even if the recipient is resident for tax purposes in a jurisdiction, that jurisdiction:

i) Does not levy corporation tax or levies corporation tax at a zero or near zero rate; or

ii) Is on a list of third country jurisdictions that have been assessed by Member States collectively or within the Organisation for Economic Co-operation and Development as being non-cooperative;

c) The payment is fully tax exempt in the jurisdiction where the payee is resident for tax purposes;

d) The payment benefits from preferential tax treatment in the jurisdiction where the beneficiary is resident for tax purposes;

2° It provides that deductions for the same depreciation of an asset are claimed in more than one jurisdiction ;

3° It provides that double taxation relief in respect of the same item of income or capital is claimed in more than one jurisdiction;

4° It includes transfers of assets and there is in the jurisdictions concerned a material difference in the amount considered to be payable in consideration for the assets.

D.-A scheme includes a specific marker relating to the automatic exchange of information and beneficial owners, or "Category D marker", where it has one of the following characteristics:

1° It is likely to have the effect of undermining the obligation to report under the law implementing European Union legislation or any equivalent agreement concerning the automatic exchange of information on financial accounts, including agreements with third countries, or which takes advantage of the absence of such provisions or agreements. Such arrangements shall include at least the following:

a) The use of an account, product or investment which is not, or is intended not to be, a financial account, but which has characteristics substantially similar to those of a financial account;

b) The transfer of accounts or financial assets to, or the use of, jurisdictions which are not bound by the automatic exchange of financial account information with the State of residence of the taxpayer concerned;

c) The re-characterisation of income and capital into proceeds or payments that are not subject to the automatic exchange of financial account information;

d) The transfer or conversion of a financial institution, financial account or the assets therein into a financial institution, financial account or assets that are not reportable under the automatic exchange of financial account information ;

e) The use of entities, constructions or legal structures that suppress or aim to suppress the declaration of one or more account holders or controlling persons under the automatic exchange of information on financial accounts ;

f) Schemes which undermine the due diligence procedures used by financial institutions to comply with their obligations to report financial account information, or which exploit the inadequacies of those procedures, including the use of jurisdictions with inadequate or insufficient anti-money laundering enforcement, or with insufficient transparency requirements in relation to legal persons or legal arrangements ;

2° It involves a non-transparent chain of formal or beneficial ownership through the use of persons, legal arrangements or structures :

a) Which do not carry on a substantial economic activity supported by sufficient staff, equipment, resources and premises; and

b) Which are constituted, managed, controlled or established in, or which reside in, any jurisdiction other than the jurisdiction of residence of one or more of the beneficial owners of the assets held by such persons, legal arrangements or structures ; and

c) Where the beneficial owners of such persons, legal arrangements or structures, within the meaning of Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purpose of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council and repealing Directive 2005/60/ EC of the European Parliament and of the Council and Commission Directive 2006/70/ EC, are rendered impossible to identify.

E.-A device includes a specific transfer pricing marker, or "Category E marker", where it has any of the following characteristics:

1° It provides for the use of unilateral protection regimes;

2° It provides for the transfer of intangible assets that are difficult to value, that are intangible assets or rights to intangible assets for which, at the time of their transfer between associated enterprises :

a) There are no reliable comparables; and

b) At the time the transaction was entered into, the projections of future cash flows or revenues expected from the intangible asset transferred, or the assumptions used to value that intangible asset, are highly uncertain, and it is therefore difficult to predict the extent to which the intangible asset will ultimately result in success at the time of transfer;

3° It involves a cross-border transfer of functions and/or risks and/or assets within the group, if the expected annual profit before interest and tax, within three years of the transfer, of the transferor(s) is less than 50% of the expected annual profit before interest and tax of that transferor(s) had the transfer not taken place.