The DAC7 directive is the latest addition to the administrative cooperation in (direct) taxation in the EU. It imposes new due diligence and reporting obligations on digital platforms, such as marketplace, rental and restaurant platforms starting January 1, 2023.
All digital platform operators operating in any EU Member State will be required to register for a ‘Platform Operator ID’, gather information on their reportable sellers and report all relevant activities annually to an EU member state’s tax authorities. Reportable relevant activities are the sales of any goods or services and renting vehicles or property. Operator registration and reporting obligations will be triggered even if only a part of the company’s business model fills the criteria of a ‘Digital platform’ and ‘Reportable relevant activities’.
Gathered and reported information includes identification and address information, financial information and residence information. Even operators that are considered excluded from these obligations will need to annually file relevant documentation to prove their exemption.
We can provide our clients with end-to-end support on all DAC7 compliance-related issues from preparation for the legislative changes to actual execution of due diligence and reporting and the transition to ‘Business as usual’.
DAC7 due diligence must be completed by the end of each reporting period, which is a calendar year. The first due diligence deadline is December 31, 2023. The deadline for reporting relevant activities is the end of January the following year. The first reporting deadline is January 31, 2024.
A digital platform is any software, website or app that enables sellers to reach buyers with the intent of performing relevant activities either directly or indirectly.
All identified digital platform operators must register with an EU Member State's tax authority in order to receive a Platform Operator ID, which is required for the reporting of relevant reportable activities. Failure to register may result in sanctions and even the barring of operations within the EU. If a platform operator is registered to another EU member state or is otherwise exempt, it may still need to provide notification of this exemption to some member states in writing.
A relevant reportable activity is the sales of any goods or services and renting vehicles or property.
Digital platforms will need to start verifying their sellers and collect relevant information for reporting purposes. This information includes but may not be limited to: seller name, person id if person, address, TIN, VAT numbers, bank information, earnings per quarter, possible commissions, fees and taxes paid. It is the responsibility of the digital platform to ensure this information is correct and up to date. Non-compliant sellers will need to be barred from using the platform.
We have a unique combination of deep EU legislation knowledge, tax and legal technology capabilities and understanding of the requirements and challenges of digital business. We can provide support in all DAC7-related issues for all EU countries and even for very complex digital platform business models spanning multiple jurisdictions.