Dutch consultation DAC7 legislation provides clarifications

What does it mean for you? 

Digital platform operators

If your enterprise is a digital platform operator, you will need to carry out specific due diligence procedures on the sellers in order to collect and verify the information necessary for the purposes of the exchange corresponding to reportable periods as of 1 January 2023. We refer you to our webpage “Taxation of the digital economy” which, for DAC7, deals with the full end-to-end process: from identifying the exact impact of DAC7 on your business to navigating the implementation of your compliance framework and digital infrastructure.

DAC7 in a nutshell

The new rules introduce standardised reporting requirements for digital platform operators. The new reporting obligations will apply to operators of digital platforms that allow certain sellers (“Reportable sellers”) to be connected, directly or indirectly, to other users in order to perform the following activities: 

• the rental of real estate;

• the provision of personal services;

• the sale of goods; and

• the rental of any mode of transport.

It is crucial that the relevant activity is performed in return for a consideration, the amount of which is known or can reasonably be known by the platform operator. 

Public consultation on the Dutch implementation of DAC7

Contents of DAC7 and the consultation documents

DAC7 and the consultation documents include several new measures. The main part regards the introduction of mandatory seller due diligence and reporting for platforms. Other measures regard extensions of reporting of categories of income such as royalties and the introduction of a legal framework for joint audits including legal protection.

The definitions in the consultation document are intended to be in line with the Directive but contain some clarifications. Below we discuss the most relevant clarifications. 

Indirect sale of goods and services 

The consultation document clarifies that an integral part of the Platform definition is that registered, third party Sellers need to be connected to users via the Platform to complete the relevant transaction. The term registration should be interpreted broadly. Situations in which the seller does not directly sell the goods or services to the users may also be in scope. As an example, the consultation documents mention the situation where the platform purchases goods from a seller and subsequently sells the goods or services to users in its own name. As such, retail platforms and similar platforms with hybrid models (e.g. ‘flash title’,  e-concession) should carefully assess whether they are in scope of DAC7.

Fines and penalties

The consultation documents stipulate that wilful misconduct or gross negligence of the obligations under DAC7 may result in penalties of the 6th category, which is currently maximized at EUR 870,000. Criminal prosecution is also possible. This is in line with the penalties under DAC4 and DAC6. 

The consultation documents clarify that these are maximum penalties and that penalties imposed should always be proportionate. What is considered proportionate depends on the specific facts and circumstances and is at the discretion of the tax inspector.

Other amendments to the DAC framework

• Joint audits: Joint audits, during which multiple tax authorities investigate the same taxpayer, are considered an additional instrument for administrative cooperation and they can strengthen the internal market. The current amendments provide for a legal framework to ensure legal certainty, e.g. terms for answering to a request for a joint audit, rights and obligations of the civil servants part of the audit, the process and the content of the joint, final report.

• Exchange of information with regard to royalties: Royalties are being added as a category of income for which information is automatically exchanged if it relates to a tax resident of another EU member state.