DAC 7 introduces a new reporting obligation for operators of platforms – software allowing sellers and users to connect. The Ministry of Finance has prepared a bill to implement the directive, which is currently going through the comment procedure. The new reporting obligation should apply from 1 January 2023.
The seventh amendment to the EU Directive on Administrative Cooperation in the field of taxation (DAC 7), adopted by the European Council on 22 March 2021, is to be implemented by member states by 31 January 2022. The new rules are to apply from 1 January 2023, with a later effective date (extended by one year) only for Article 12a regulating joint audits. The directive aims to ensure a level playing field for all digital platforms and to prevent unfair competition.
The new reporting obligation will apply to platforms that facilitate carrying out selected activities for consideration. Four areas of reportable activities have been defined:
- provision of immovable property
- provision of means of transport
- provision of personal services
- sales of goods.
Reportable activities concerning immovable property include not only rentals, but also the provision of accommodation and other manners of providing immovable property or its part. A personal service means time- or task-based work performed by an individual (natural person), such as a transportation service provided by a driver; this distinguishes this transportation service from the provision of means of transport.
A platform is defined as software allowing sellers to be connected to other users for the purpose of carrying out a reportable activity for such users. A platform operator may be a legal person or an entity without a legal personality (though not an individual) that contracts with platform users (sellers) to make available to them all or part of the platform allowing them to connect with the users of the reportable activities. Sellers are defined as platform users who carry out or intend to carry out a reportable activity. Some platforms and sellers are excluded from the reporting obligation, subject to meeting stipulated conditions.
Reportable information includes selected information about the platform, its operator, sellers, and effected transactions. The information shall be reported by 31 January of the year following the year being reported; the first-time reporting, for year 2023, shall take place by 31 January 2024.
Operators shall report information on their activities in the entire EU in a single elected EU state. Information thus obtained shall be shared with the member states concerned. This will provide tax administrations across the EU with information on transactions effected through digital platforms and lead to the identification of transactions that might otherwise not be declared in tax returns. Although the reporting obligation itself will only apply to platform operators, indirectly, it will also affect all who are commercially active on the platforms.
Under the currently proposed wording, if a platform operator breaches their reporting obligations, they may face a fine of up to EUR 60,000 for each case of breach. The total fine may thus be considerably higher, depending on the number of infractions.