Executive summary

On 28 October 2024, the European Commission (the Commission) published a legislative proposal (and Annex) for the ninth revision of the Directive on Administrative Cooperation (Council Directive 2011/16/EU or DAC).

This amendment primarily aims to transpose the GloBE Information Return (GIR) into EU law, enabling central filing via a Top-up tax information return as provisioned under Article 44(3) of the Minimum Tax Directive.

To achieve this, the proposal:

• Sets up a system for tax authorities of Member States to exchange information with each other
• Introduces a standard form, in line with the form developed by the Inclusive Framework of the OECD and the G20, which covered taxpayers will have to use to report certain tax-related information

The form also aims to ensure that taxpayers provide the same information in the same format, making it easier for them to fulfill their filing obligations and for tax authorities to assess and exchange it.

The proposal will now move to the Council of the EU for negotiations. Adoption of the Directive will require unanimous agreement among all 27 Member States. Once adopted, Member States should transpose the rules under DAC9 by 31 December 2025, with the first reporting deadline set for 30 June 2026.

Detailed discussion

Background

On 15 December 2022, the EU Member States unanimously adopted the Directive aimed at ensuring a global minimum level of taxation for MNE groups and large-scale domestic groups in the Union (the Minimum Tax Directive). EU Member States had until 31 December 2023 to transpose the Minimum Tax Directive into national legislation with the rules to be applicable for fiscal years starting on or after 31 December 2023 — except the UTPR, which is to be applicable for fiscal years starting on or after 31 December 2024.¹

Article 44 of the Minimum Tax Directive sets out the requirements on filing for in-scope entities, referring to a Top-up tax information return, which must be filed using a standard template and include certain specified data points. Under Article 44, there are two options for filing:

1. The baseline scenario: Paragraph 2 indicates that each constituent entity must file its Top-up tax information return in the Member State where it is located.
2. Derogation: Paragraph 3 indicates that entities can deviate from paragraph 2's local filing requirement to the extent that (i) the Ultimate Parent Entity (or a designated filing entity) files the Top-up tax information return on behalf of the entire MNE, and (ii) arrangements to exchange information between the jurisdictions involved are in place.

On 17 July 2023, the OECD released a standardized template for the GIR that includes the information considered necessary for tax authorities to perform a risk assessment and to evaluate the correctness of a Constituent Entity's Top-up Tax liability under the GloBE Rules.²

From 10 July to 19 August 2024, the OECD also held a public consultation³ on a schema in extensible mark-up language (GIR XML Schema), a corresponding user guide to facilitate domestic GIR filings and the technical format for exchanging GIR information between tax administrations.

DAC9 translates the GIR into the EU framework by making it the Top-up tax information return envisaged in Article 44, ensuring that the standardized template and associated requirements are aligned with the OECD's guidelines and are implemented consistently across EU Member States.

The proposal also lays down a framework to facilitate the exchange of the Top-up tax information return between Member States and enable MNEs to switch from local to central filing. This framework includes a "dissemination approach" to ensure that all relevant Member States receive the information they need, based on their role in the MNE, in line with the OECD framework. For the exchange of information with non-EU Member States (third-country jurisdictions), Member States will have to sign appropriate international agreements with those jurisdictions. According to DAC9, the proposed EU rules are compatible with the rules governing information exchange with third-country jurisdictions, to ensure smooth functioning and minimize administrative burden.

Proposed amendments to the Directive on Administrative Cooperation

1. Article 8ae: Framework for the exchange of Top-up tax information returns

DAC9 introduces Article 8ae into the DAC framework, establishing a framework for the exchange of Top-up tax information returns as mandated under Article 44 of the Minimum Tax Directive, which provides the possibility for central filing by the Ultimate Parent Entity (UPE) or designated filing entity of the MNE group under paragraph 3.

According to Article 8ae, each Member State must require the UPE or designated filing entity of the MNE group located in its territory to file the Top-up tax information return using the standard template provided in Section III of the newly added Annex VII (see below).

Member States should enable reporting entities to file the Top-up tax information return within 15 months after the last day of the Reporting fiscal year, except for the first Reporting fiscal year, where the filing must be done no later than 18 months after the last day of the Reporting fiscal year, in line with Articles 44(7) and 51 of the Minimum Tax Directive.

The competent authority of the Member State that receives the Top-up tax information return must automatically exchange it to other Member States in accordance with the OECD's envisaged dissemination approach, under which implementing Member States would receive the data relevant to them:

• The Member State of the MNE's UPE will receive the full Top-up tax information return.
• All implementing Member States will receive the full General section of the Top-up tax information return.
• Qualified Domestic Top-up Tax (QDTT)-only Member States, where constituent entities of the MNE are located, will receive the relevant parts of the General section of the Top-up tax information return.
• Member States with taxing rights under the Minimum Tax Directive will receive specific Jurisdictional sections.

Exchange with other Member States under the dissemination approach should take place no later than three months after the filing deadline for that Reporting fiscal year, except that for the first year of application, the deadline for exchanging information is six months after the filing deadline.

In its Preamble, the Directive indicates that for the exchange of information with jurisdictions outside the EU, Member States will need to sign appropriate international agreements.

2. Article 9a: Top-up tax information return corrections and compliance

Article 9a establishes procedures for collaboration between Member States on corrections, compliance and enforcement of Top-up tax information returns. If a competent authority of a Member State identifies errors in a Top-up tax information return from another Member State, it must notify the competent authority of the other Member State, which must then take appropriate measures to obtain the corrected Top-up tax information return from the filing entity and exchange it with the relevant competent authorities of Member States. Additionally, if a return is not exchanged within the deadline, the notified authority must determine the reason for the delay and inform the notifying authority within one month, including the expected exchange date if applicable.

The communication of information to competent authorities of other Member States will occur using the standard computerized form to be developed by the European Commission through implementing acts before 1 January 2026.

3. Other amendments

In addition to implementing the Top-up tax information return, the proposal introduces additional amendments to the DAC framework. Article 22 is amended to also require Member States to ensure that reporting entities can electronically confirm the validity of Taxpayer Identification Numbers (TINs) for taxpayers subject to information exchange. Moreover, Article 25a is expanded, mandating that Member States establish effective, proportionate and dissuasive penalties for violations of national provisions related to Article 8ae.

Annex VII: Filing rules and form for Top-up tax information return

Annex VII is proposed to be added to the DAC, which (i) defines terms used in the Annex and relevant articles in the DAC, (ii) describes the filing rules that apply to the filing entity of the MNE, and (iii) includes the Top-up tax information return (which claims to be fully in line with the GIR developed by the OECD).

Section III contains the following categories for which MNEs need to provide the data points:

• MNE Group information: This section includes general information about the MNE Group and its corporate structure, identifies the Filing Constituent Entity and provides a high-level summary table on the application of the rules in each jurisdiction where the MNE operates.
• Jurisdictional safe harbors and exclusions: This section includes more information for each jurisdiction in which the MNE group operates. Where safe harbors or exclusions apply, only limited information would be required.
• Computations: This section mandates that where safe harbors and exclusions do not apply, the MNE Group would provide the effective tax rate and Top-up Tax computations, including the qualifying income adjustments, as well as the details of adjusted covered taxes, and Top-up Tax allocations where required.

The European Commission can amend the Top-up tax information return by delegated act to reflect future updates agreed at the international level.

Next steps

The proposal of the European Commission will now follow the special legislative procedure for taxation matters, requiring consultation with the European Parliament, and unanimous agreement of all 27 EU Member States in Council. Given that the first Top-up tax information reports need to be filed by 30 June 2026, adoption is expected to take place relatively soon to give Member States sufficient time to transpose into national law.

Following the formal adoption of DAC9 by the Council, Member States — including those that have chosen to defer the application of the Minimum Tax Directive — will have until 31 December 2025 to transpose the rules.

It is also expected that the European Commission will adopt an implementing act laying down standard computerized forms, including the linguistic arrangements, for the automatic exchange. The Draft Directive also proposes that the Top-up tax information return can be amended by the European Commission through delegated acts to reflect future updates agreed at the international level.

Implications

The Top-up tax information return highlights the significant amount of data that businesses will need to collect and report for compliance with the Minimum Tax Directive.

It is important to note that DAC9 only facilitates the exchange of information within the EU. There is currently no clarity on when and how the exchange of information with third countries will be arranged.

Businesses should monitor the legislative process leading to the adoption of the Directive proposal, as changes may be considered during the negotiations in the Council of the EU. Businesses should evaluate the changes to their accounting and IT systems that will be needed to identify and produce all the data points required for the Top-up tax information return. In addition, businesses should closely monitor the approaches taken by relevant jurisdictions in implementing the GIR and/or the Top-up tax information return and currently announcing domestic reporting procedures.