The DAC7 directive (EU Directive 2021/514) is the latest initiative in the field of tax transparency that extends reporting requirements to digital platforms. DAC7 requires digital platform operators to report certain information about the ‘reportable’ entities that are active on their platforms and undertaking certain commercial activities. Tax authorities will subsequently use this information to assess the reportable seller’s fair share of income tax and VAT. Furthermore, this information will be exchanged among the EU Member States.
The reporting obligation applies to tax resident platforms, incorporated, managed, or permanently established in the EU. DAC7 reporting obligations also expand to non-EU-based digital platforms. Accordingly, such platforms must report under DAC7 if the sellers on their platform are facilitating buyers that are residents of the EU.
The DAC7 directive applies to ‘digital platforms, which are defined as ‘any website, mobile application or any other software that allows sellers to connect with buyers regarding a transaction on that particular platform’. DAC7 applies to digital platform operators that enable sales through their platforms. Furthermore, it also applies to platforms that enable other activities, such as the provision of personal services (freelancing/consultancy, etc.), rental of any mode of transport, and rental of immovable property, both residential and commercial, as well as rental of parking spaces.
Under DAC7 the first reporting period will start on January 1, 2023, and it will end on December 31, 2023. Moreover, the first deadline for submitting the DAC7 report will be January 31, 2024. Special attention is required to ensure readiness for compliance, as not complying with DAC7 requirements could trigger the risk of high penalties. In the Netherlands, penalties could be up to Euro 900.000.
How can we support you?
This means that companies have a couple of months to verify readiness for compliance before the first reporting period starts. In this regard, we strongly recommend undertaking the following steps to ensure readiness (i.e. to avoid delayed reporting, misreporting, or non-reporting):