The Directive on Administrative Cooperation in the Field of Taxation has already been subject to several amendments; the last of these, DAC 6, dealt with extending the reporting obligation to include cross-border arrangements. At present, a further amendment, DAC 7, is being prepared, proposing the introduction of the reporting obligation for digital platforms. The new reporting obligations are to take effect starting January 2023.
With regard to the quickly progressing digitalization of the economy, the European Commission has come up with a proposal adding new rules to the Directive on Administrative Cooperation in the Field of Taxation. This seventh amendment is to concern new reporting obligations for digital platforms. The aim of the amendment is to identify entities generating profit through digital platforms, and to ensure the automatic exchange of information between Member States regarding the profits generated in this manner, regardless of whether such a platform is located within the EU or not. The information collected should serve to prevent tax evasions and should be used for the correct assessment of indirect taxes (VAT) as well as direct taxes (income tax and others). DAC VII also introduces changes in other fields and modifies certain previously issued rules.
What specific reporting obligations does DAC 7 introduce?
Based on the proposed amendment, DAC 7, it will be mandatory for digital platforms to collect and verify information on the sellers that perform their activities through the given platform. The platforms will also be obliged to report this information to the tax administration, in line with the new rules.
The reporting obligation will apply to a large number of digital platforms, regardless of whether they are established in the EU or not. The decisive factor will be whether or not they enable the sale of goods and services that are subject to the reporting obligation. The platforms will collect and report information on the sellers that use these platforms for selling goods, providing personal services, or even for renting immovable property, for example.
The reported information should include, among other things, the name, address, tax identification number, information on the seller’s permanent establishment as well as data on the total sums paid or credited to the seller through the platform. The first report should be submitted at the beginning of 2024 for the 2023 reporting period.
The VAT e-commerce amendment soon entering into force
This is not the only change to be expected in the field of digital platforms. The “e-commerce amendment”, which is to become effective starting July 2021, is a hot issue in the field of VAT. This amendment introduces, among other things, the obligation to keep separate records of sales that took place through a platform. However, platforms are only required to present such records if specifically asked to do so by the tax administrator.
If you would like to find out more about the planned reporting obligation and its practical impacts, do not hesitate to contact us. We will be monitoring the developments in this field and keep you up to date on any news regarding the topic.