Mandatory Disclosure Rules (MDR) require detailed reporting of arrangements that may undermine tax transparency, particularly those designed to bypass or weaken the Common Reporting Standard (CRS).

In this episode, we break down what types of arrangements are reportable and what information must be disclosed.

MDR focuses on arrangements that interfere with transparency—especially under CRS.

Arrangements are reportable where they:

• Eliminate CRS reporting obligations entirely

• Reclassify entities or accounts to fall outside reporting scope

• Exploit gaps between jurisdictions

👉 These structures aim to avoid reporting at the source.

Even where CRS technically still applies, arrangements may be reportable if they:

• Obscure or divert the beneficial owner

• Use layered entities or intermediaries

• Create complexity to reduce visibility

👉 The key issue is loss of transparency, not just formal compliance.

When an arrangement is reportable, detailed information must be submitted to tax authorities.

This typically includes:

• Name, address, and contact details

• Tax Identification Number (TIN)

• Date of birth (for individuals)

The disclosure must identify:

• The person making the disclosure (intermediary or taxpayer)

• The relevant taxpayer

• Any clients or intermediaries involved in the arrangement

A clear explanation of:

• How the structure works

• Its purpose and design

• Key features triggering MDR reporting

Disclosure must include:

• Countries where the arrangement is implemented

• Jurisdictions where it is made available

• Any cross-border elements

MDR is designed to give tax authorities:

• A complete picture of the structure

• Insight into who is involved

• Visibility across multiple jurisdictions

This enables:

• Targeted audits

• Cross-border cooperation

• Early detection of systemic risks

Under MDR, reportable arrangements typically involve:

• Removal or avoidance of CRS reporting

• Structures that obscure beneficial ownership

And disclosures must include:

• Full identification of all parties

• A detailed description of the arrangement

• All relevant jurisdictions

In today’s transparency environment:

Mandatory Disclosure Rules (MDR) are not just about transparency—they come with strict deadlines and meaningful penalties. For intermediaries and taxpayers, non-compliance can be both financially costly and reputationally damaging.

MDR operates on a tight reporting timeline.

In most cases:

• Information must be disclosed within 30 days

• The clock starts when:

• The arrangement is made available, or
• The first step of implementation is taken

👉 This short window reflects MDR’s goal of real-time intelligence, not retrospective reporting.

Failure to comply can result in substantial penalties, which vary by jurisdiction.

Examples include:

• Fines of up to €25,000 in Germany

• Daily penalties in United Kingdom for ongoing non-compliance

• One-off fines or escalating sanctions depending on severity

👉 Penalties may apply to:

• Intermediaries (advisors, lawyers, banks)

• Taxpayers (where no intermediary reports)

MDR enforcement is not limited to financial penalties.

Many jurisdictions apply “name and shame” measures, including:

• Public identification of non-compliant taxpayers

• Disclosure of intermediaries promoting reportable schemes

• Publication of enforcement actions

This approach is designed to:

• Disrupt the marketing of aggressive tax schemes

• Warn potential clients about high-risk promoters

• Deter repeat behavior by increasing visibility

👉 It transforms MDR from a compliance obligation into a market deterrence tool.

MDR is designed to:

• Capture arrangements before they spread

• Hold intermediaries accountable

• Encourage early and proactive disclosure

Strict penalties ensure:

• Timely reporting

• Accurate information

• Serious compliance engagement

Under MDR:

• Reporting must generally occur within 30 days

• Penalties can include significant fines and daily sanctions

• Reputational consequences—such as public disclosure—can be severe

In today’s environment:

Under Mandatory Disclosure Rules (MDR), not every arrangement is reportable. Instead, reporting is triggered when an arrangement exhibits specific characteristics known as “hallmarks.”

These hallmarks act as risk indicators, helping tax authorities identify structures that may involve tax avoidance or attempts to bypass transparency rules.

Hallmarks are defined features or patterns that suggest an arrangement could be used to:

• Avoid tax

• Circumvent reporting obligations (e.g., CRS)

• Obscure beneficial ownership

If an arrangement meets one or more hallmarks, it may need to be reported to tax authorities.

These are broad indicators commonly found in marketed or packaged schemes.

Examples include:

• Confidentiality clauses preventing disclosure of the structure

• Success-based fees, where advisors are paid based on the tax advantage achieved

• Standardized structures offered to multiple clients

👉 These hallmarks focus on the commercial behavior of promoters and intermediaries.

These target particular types of arrangements that raise tax or transparency concerns.

Examples include:

• Cross-border payments between related entities

• Acquisition of loss-making companies to offset profits

• Structures designed to disguise beneficial ownership

• Arrangements exploiting mismatches between jurisdictions

👉 These hallmarks focus on the technical design of the arrangement.

Not all hallmarks automatically trigger reporting.

For certain hallmarks, reporting is required only if:

This is known as the Main Benefit Test (MBT).

• If the tax advantage is incidental → may not be reportable

• If the tax advantage is a key driver → likely reportable

👉 MBT introduces a purpose-based test, not just a structural one.

Hallmarks are central to MDR because they:

• Define what must be reported

• Trigger obligations for intermediaries and taxpayers

• Enable tax authorities to identify high-risk arrangements early

They shift the system from:

• Technical compliance → to intent and risk assessment

Under MDR:

• Hallmarks are red flags, not automatic violations

• They identify arrangements that may require disclosure

• Some hallmarks apply automatically

• Others depend on the Main Benefit Test

In today’s environment:

Mandatory Disclosure Rules (MDR) are not a single global law—they are a network of coordinated regimes across jurisdictions. While the principles are aligned, each framework applies differently depending on geography and scope.

In this episode, we break down the three key MDR systems shaping global tax transparency.

The European Union framework is based on:

Directive (EU) 2018/822

• Cross-border tax arrangements within the EU

• Arrangements that meet specific “hallmarks”

• Both aggressive tax planning and certain standard structures

• Reporting obligation primarily on intermediaries

• Applies across all EU Member States

• Automatic exchange of reported information between countries

👉 DAC6 is one of the broadest and most widely enforced MDR regimes.

The United Kingdom operates a dual system:

• Disclosure of Tax Avoidance Schemes (DOTAS)

• Focuses on UK domestic tax avoidance arrangements

• Long-standing regime with established enforcement

• Targets offshore structures and CRS avoidance

• Aligned with OECD MDR principles

• Focuses on arrangements that:

• Circumvent CRS
• Obscure beneficial ownership

👉 The UK separates domestic vs international disclosure frameworks.

At the global level, MDR is driven by the

Organisation for Economic Co-operation and Development.

• Provide a standardized framework for countries to adopt

• Target arrangements that:

• Avoid CRS reporting
• Conceal beneficial ownership

• Countries implement the rules into domestic law

• Information is shared internationally

• Focus is on intermediaries and promoters

FrameworkScopeFocus

DAC6 (EU)

Cross-border EU arrangements

Broad hallmarks & automatic exchange

UK DOTAS

Domestic UK arrangements

Tax avoidance schemes

UK MDR

Offshore / CRS avoidance

OECD-aligned

OECD MDR

Global model

CRS avoidance & transparency

MDR operates on three levels:

• Regional (EU DAC6)

• National (UK DOTAS & MDR)

• Global (OECD Model Rules)

Despite differences, they share a common goal:

Mandatory Disclosure Rules (MDR) are designed to identify tax planning before it becomes widespread. Instead of relying only on reporting financial accounts, MDR requires taxpayers and intermediaries—including lawyers, banks, and advisors—to disclose certain arrangements directly to tax authorities.

Developed by the

Organisation for Economic Co-operation and Development, MDR operates through two distinct but complementary frameworks:

Originating from

OECD BEPS Action 12, this initiative focuses on early detection of tax avoidance schemes.

Arrangements that exhibit specific “hallmarks”, such as:

• Opaque ownership structures

• Artificial transactions lacking economic substance

• Tax base erosion strategies

• Structures designed to generate tax advantages across jurisdictions

• Provide real-time intelligence to tax authorities

• Allow early intervention

• Prevent widespread adoption of aggressive schemes

The second pillar focuses specifically on circumventing the Common Reporting Standard (CRS).

Earlier attempts to close loopholes—through:

• FAQs

• Implementation guidance

proved difficult to enforce consistently.

CRS avoidance strategies evolved quickly, often described as:

Now:

• Any arrangement with CRS avoidance hallmarks is reportable

• Focus is on design and intent, not just technical compliance

• Intermediaries must disclose structures that:

• Obscure beneficial ownership
• Reclassify entities to avoid reporting
• Exploit gaps between jurisdictions

MDR applies to:

• Tax advisors

• Lawyers

• Banks

• Wealth managers

• Corporate service providers

👉 If no intermediary is involved, the taxpayer themselves may be required to report.

Mandatory Disclosure Rules represent a major shift:

• From reactive reporting (CRS) → to proactive disclosure (MDR)

• From focusing on accounts → to focusing on arrangements and planning

Today:

Mandatory Disclosure Rules (MDR) are a key part of the global transparency framework designed to identify and deter arrangements that undermine CRS reporting. Rather than focusing only on taxpayers, MDR targets the ecosystem behind tax planning—the intermediaries, promoters, and structures themselves.

Developed by the

Organisation for Economic Co-operation and Development, MDR aims to:

• Define and capture intermediaries involved in CRS avoidance

• Identify those who design, market, or supply such arrangements

• Create early visibility for tax authorities

This shifts the focus from detection after the fact → to prevention and intelligence gathering.

MDR establishes clear rules for who must report, including:

• Advisors designing structures

• Promoters marketing arrangements

• Service providers facilitating implementation

This ensures responsibility does not sit solely with the taxpayer.

Information collected under MDR is shared between jurisdictions through the:

Convention on Mutual Administrative Assistance in Tax Matters

Key feature:

• Spontaneous exchange (not automatic)

• Triggered where a country believes the information may be relevant to another jurisdiction

This allows tax authorities to act quickly across borders.

MDR is fundamentally an intelligence tool.

It enables:

• Identification of emerging avoidance schemes

• Analysis of patterns across jurisdictions

• Early intervention before widespread use

The information collected allows:

Authorities can focus on high-risk taxpayers and structures

The Global Forum on Transparency and Exchange of Information for Tax Purposes can:

• Identify weaknesses in CRS implementation

• Recommend improvements

By requiring disclosure:

• The marketing of avoidance schemes becomes riskier

• Intermediaries face greater scrutiny

• Aggressive planning is discouraged

MDR builds on earlier transparency initiatives, including:

• OECD BEPS Action 12

• UK disclosure regimes (e.g., DOTAS / POTAS)

• EU Mandatory Disclosure Rules (DAC6)

It represents the next evolution of global tax transparency.

Mandatory Disclosure Rules are not just about reporting—they are about changing behaviour.

They aim to:

• Expose CRS avoidance early

• Hold intermediaries accountable

• Enable cross-border intelligence sharing

• Deter aggressive tax planning before it spreads

In today’s environment:

Global transparency doesn’t stop at reporting bank accounts. The OECD introduced Mandatory Disclosure Rules (MDR) to go one step further—targeting the people who design and promote structures that may undermine CRS.

In this episode, we explain what MDR is, who it targets, and why it matters.

Mandatory Disclosure Rules are part of the OECD’s broader transparency framework, developed by the

Organisation for Economic Co-operation and Development.

Their purpose is to:

• Detect arrangements designed to circumvent CRS reporting

• Increase visibility over cross-border tax planning structures

• Shift focus from taxpayers to intermediaries and promoters

MDR is specifically aimed at:

Those who:

• Create or market structures intended to avoid reporting

• Develop offshore arrangements or planning strategies

• Package and sell these structures to clients

This includes professionals who:

• Advise on or implement structures

• Facilitate the setup of entities or accounts

• Provide legal, tax, or financial services connected to the arrangement

Even partial involvement may trigger obligations.

Under MDR, certain arrangements must be reported if they:

• Undermine or bypass CRS reporting

• Obscure beneficial ownership

• Use opaque structures or jurisdictions

• Exploit classification mismatches

These are often referred to as “hallmarks” of avoidance.

If an arrangement meets the criteria:

• The intermediary must report it to tax authorities

• If no intermediary is involved, the taxpayer may have to report

• The information is then shared internationally between jurisdictions

This creates a proactive transparency system, rather than relying solely on CRS data.

MDR significantly expands the compliance landscape:

• It targets intent and design, not just outcomes

• It increases scrutiny on advisors and institutions

• It creates early visibility for tax authorities

Failure to comply can result in:

• Financial penalties

• Regulatory consequences

• Reputational risk

Mandatory Disclosure Rules are designed to:

• Catch structures before they succeed

• Hold intermediaries accountable

• Close gaps in CRS reporting

The message is clear:

Not every Financial Institution (FI) under the Common Reporting Standard (CRS) is required to report. Certain entities are automatically treated as Non-Reporting Financial Institutions because they pose a low risk of tax evasion and serve public or systemic functions.

In this episode, we break down which institutions are exempt—and when those exemptions can be lost.

CRS exempts entities that form part of the state.

This includes:

• National governments

• Political subdivisions (e.g., states, provinces, municipalities)

• Agencies or entities wholly owned by government bodies

These entities are excluded because they perform public administrative functions, not private wealth management.

Certain supranational institutions are also exempt, including:

• World Bank

• International Monetary Fund (IMF)

• European Bank for Reconstruction and Development

To qualify:

• The organization must be primarily composed of governments

• It must operate for public or multilateral purposes

Central banks are automatically treated as Non-Reporting FIs.

Examples include:

• Federal Reserve System

• Bank of England

Also included:

• Entities wholly owned by one or more central banks

These institutions are excluded because they support monetary policy and financial stability, not private investment activity.

CRS exemptions are not absolute.

An otherwise exempt entity may lose its Non-Reporting FI status if:

• It engages in commercial financial activity, or

• Financial accounts are used for private benefit

Examples:

• A government-owned entity operating like a commercial bank

• An account used to channel income to private individuals

A key limitation:

If income or assets held by an exempt entity are used to benefit private persons, then:

• The entity may be treated as a Reporting FI for that period

• CRS obligations can apply for that year

This prevents abuse of public-entity exemptions for private wealth structuring.

Under CRS, the following entities are generally Non-Reporting Financial Institutions:

• Governmental entities

• International organizations

• Central banks

However:

• The exemption depends on function, not just status

• Engaging in commercial activity or benefiting private persons can trigger reporting obligations

CRS exemptions are designed to protect public institutions—not to create loopholes.