Mandatory Disclosure Rules or MDRs

Define intermediaries who disclose, design, or supply CRS avoidance arrangements. Information is exchanged spontaneously under the Convention MAA when the transmitting country suspects that the information may be of interest to another country. Gather intelligence on CRS avoidance arrangements so that:

Authorities can conduct targeted audits The Global Forum can address inadequate implementation The marketing and implementation of such arrangements are deterred Inspired by BEPS Action 12, UK POTAS, and EU MDR.

Mandatory Disclosure Rules (MDR) require taxpayers and intermediaries (advisors, banks, lawyers) to report under two separate MDR initiatives to their tax authorities:

Aggressive cross-border tax arrangements: Originating from OECD BEPS Action 12, these rules aim to combat tax avoidance through early, real-time information, often focusing on “hallmarks” such as opaque structures or tax base erosion.

CRS avoidance: Efforts to close CRS loopholes—through updates to FAQs and the implementation handbook—proved challenging, often likened to trying to stamp out cockroaches. Now, any arrangement with avoidance hallmarks is reportable.

EU DAC6: Directive 2018/822 (the sixth amendment to the Directive on Administrative Cooperation) requires the disclosure of cross-border tax arrangements that meet specific “hallmarks.”

UK DOTAS & MDR: The UK uses the Disclosure of Tax Avoidance Schemes (DOTAS) for domestic arrangements and specialized MDR for offshore structures.

OECD Model Rules: A global standard for reporting arrangements designed to circumvent the Common Reporting Standard (CRS) or conceal beneficial ownership.

Arrangements are reportable if they possess certain characteristics, or “hallmarks,” which may include:

Generic Hallmarks: Features common to promoted schemes, such as confidentiality agreements or fees contingent on the tax benefit obtained.

Specific Hallmarks: Target specific areas such as cross-border payments between related companies, loss-making acquisitions, or arrangements that disguise beneficial ownership.

Main Benefit Test: For some hallmarks, reporting is only required if a primary benefit of the arrangement is obtaining a tax advantage.

Substantial penalties, ranging from one-off fines to daily penalties Deadline: Information must generally be disclosed within 30 days of the arrangement being made available or from the implementation of the first step.  Penalties: Non-compliance can result in significant financial fines (e.g., up to €25,000 in Germany or daily penalties in the UK), as well as reputational risk.

“Name and shame”

A measure used by tax administrations in cases of intentional tax evasion and fraud.  The public naming of non-compliant taxpayers and intermediaries disrupts promotion activities and warns taxpayers that the promoter’s behavior poses a systematic risk.

Arrangements where CRS reporting obligations are removed  Opaque offshore structures where CRS reporting obligations formally remain but the beneficial owner is diverted or obscured.

Information typically required in a disclosure

Name, address, contact details, TIN, and date of birth Person making the disclosure Taxpayer with respect to the arrangement or structure Any “client” or intermediary involved Description of the arrangement or structure Jurisdictions where the arrangement or structure is made available.

Reasonable to conclude that it is designed, marketed, or has the effect of:

Circumventing the CRS, or Exploiting the absence of CRS (e.g., where no exchange agreement exists), or Undermining or exploiting weak due diligence procedures, or Undermining the intended policy of CRS, including through misinterpretation or misapplication (e.g., incorrect or incomplete information).

Hallmarks

1. Use of an account, product, or investment with features substantially similar to a Financial Account.

2. Transfer of a Financial Account, or its funds or financial assets, to a non-reporting Financial Institution (FI).

3. Conversion or transfer of a Financial Account, or its funds or financial assets, into a non-reportable account.

4. Conversion of a Financial Institution (FI) into a non-reporting FI.

5. Undermining or exploiting weaknesses in due diligence to correctly identify: The Account Holder or Controlling Person All jurisdictions of tax residence

6. Allowing, or purporting to allow:

An entity to be treated as an Active NFE Investment through an entity without CRS reporting Avoidance of a person being treated as a Controlling Person Classification of payments made for the benefit of an Account Holder or Controlling Person as non-reportable.

Identity of the beneficial owner obscured Differs from C(i) arrangements, as the reporting obligation for the structure is generally not removed.  A “C(i)” arrangement in the context of beneficial ownership typically refers to a specific, often technical, sub-category within anti-money laundering (AML), tax, or financial regulation frameworks designed to identify who ultimately controls or benefits from a legal entity.

Includes structures holding assets other than Financial Accounts (e.g., property, operational companies, gold, etc.).

Example: a passive offshore vehicle held through an opaque ownership structure that obscures the identity of the beneficial owner.

1. Intermediaries

 The primary reporting obligation generally falls on intermediaries involved in designing, marketing, or managing the arrangement—such as tax advisors, accountants, law firms, and banks.

This includes any person who is resident, incorporated, or has a place of management in [country] and who: Makes an arrangement or structure available for implementation; or Provides “relevant services” in relation to that arrangement.

Examples include:

Lawyers

Accountants

Financial advisors

Trustees

Administrators

Management (e.g., corporate directors)

Providers of compliance services for offshore structures

2. Relevant Taxpayers

 The reporting obligation shifts to the relevant taxpayer where:

There is no qualifying intermediary (e.g., in-house arrangements); or

The intermediary is exempt due to legal professional privilege.

This may arise in cases involving:

Intermediaries protected by professional confidentiality privilege

Foreign intermediaries with no reporting obligations or who are unable to comply.

• Lawyers, due to client–lawyer confidentiality (legal professional privilege)
• Intermediaries who are tax resident in jurisdictions that have not implemented the MR or an equivalent regime.

Not a single case has been published, with no loopholes identified and no intermediaries penalised. Participation is limited—only a handful of jurisdictions have implemented the regime beyond the EU. It excludes primary intermediaries, as non-participating entities can market freely across jurisdictions, and lawyers are carved out due to client confidentiality obligations.

The scope appears overreaching. A “reportable taxpayer” includes any actual or even potential end-user. For example, a promoter may be required to report a potential customer within 15 days, even if that customer shows no interest. Penalties apply for non-compliance on retroactive activity dating back to October 2014, raising concerns around ex post facto criminal sanctions, which are prohibited in most jurisdictions.

Structures may be reportable even when involving non-CRS assets such as gold, property, or chattels.

The rules assert extraterritorial reach. However, most countries typically limit extraterritorial jurisdiction over residents to serious offences or specific contexts—such as treason, bribery, smuggling, crimes against minors, female genital mutilation, torture, terrorism, grave breaches of the Geneva Conventions, war crimes, crimes against humanity, and genocide.

There is also a requirement to report across the entire chain—upstream and downstream clients, intermediaries, and taxpayers—even where no direct services were provided or contact existed.

The retroactive scope extends further: if an arrangement was designed or marketed in 2015 and never revisited, upstream intermediaries may still be reportable if a third-party downstream intermediary later markets the same arrangement, even if it is never implemented.

Compared to the General Anti-Avoidance Rule (GAAR), Mandatory Disclosure Rules (MDR) provide tax authorities with a significantly broader range of information.