EU expands automatic exchange of information for digital platforms (DAC7)

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 over 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 the dedicated page on “Taxation of the digital economy” under theme DAC7 in which you can see how PwC can assist you in the full end-to-end process, from identifying the exact impact of DAC7 on your business to assisting and implementing within your Compliance framework and digital infrastructure, as well as assist in your annual reporting towards your local tax authority.

Sellers using digital platforms

If you are a Seller using a digital platform for the rental of immovable property, the intermediation to perform personal services, the sale of goods or the rental of vehicles and other transportation, you must be aware of the fact that from 2023 the EU Member States’ tax authorities will have information about your activities performed via these platforms. 

In general, the tax authorities may use this information for their tax audits (regarding personal or corporate income tax but also VAT and other indirect taxes). 

DAC7 in a nutshell 

The new rules aim to provide the EU Member States’ tax authorities with the information necessary to ensure the enforcement of tax rules regarding commercial activities performed with the intermediation of digital platforms. It introduces standardised reporting requirements for digital platform operators.

The new reporting obligations will apply to operators of both EU and non-EU digital platforms that allow certain sellers (“reportable sellers”) to be connected to other users in order to perform the following (cross-border or domestic) activities:

• the rental of immovable property;
• the provision of personal services;
• the sale of goods, and
• the rental of any mode of transport.

Reporting will apply regardless of the legal nature of the seller. However, webshop and platforms that only sell their own product are out of scope. The DAC7 reporting obligation aims specifically at situations of intermediation by digital platforms. 

Timing of the reporting

The information should be reported by the platform operator to the competent tax authorities ultimately 31 January of the year following the calendar year in which the seller is identified as a reportable seller. The first information shall be communicated for Reportable Periods as from 1 January 2023. This means that the first DAC7 reporting for this information should take place ultimately 31 January 2024. The receiving EU Member State will then exchange the information received with the tax authorities of the other EU Member States on an annual basis.

Other amendments to the DAC framework

• Joint audits: new provisions allow for an administrative enquiry jointly conducted by the competent authorities of two or more EU Member States, and linked to one or more persons of common or complementary interest to the competent authorities of those EU Member States. 

• Group requests: apart from the automatic exchange of information between tax authorities, it is also possible that the tax authorities of an EU Member State make requests to another EU Member State for specific information about a certain taxpayer. DAC7 now makes it possible for tax authorities to also make more general requests that do not concern specific taxpayers but rather certain groups of taxpayers who cannot be identified individually. 

• Exchange of information with regard to royalties: DAC7 adds to the list of information that tax authorities of the EU Member States will automatically exchange information about royalty payments. The term ‘royalties’ means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work, including cinematograph films and software, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience; payments for the use of, or the right to use, industrial, commercial or scientific equipment shall be regarded as royalties (as provided in the EU Interest and Royalty Directive).