DAC7 – improving tax transparency in reporting taxable income gained through digital platforms

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On 22nd March, 2021, the Council adopted amendment to the Directive on administrative cooperation in the field of taxation (the so called DAC7), which main purpose is to improve the transparency in declaring taxable income earned from commercial activities performed with the intermediation of digital platforms. This regulatory update is motivated by the idea that “the platform operators are better placed to collect and verify the necessary information on all sellers operating on and making use of a specific digital platform.”

The member states must transpose the amendments by 31st January, 2022 and they must enter into force by 1st January 2023. The first reports on the Reportable sellers must be submitted to the tax authorities by 31st January 2024. Obliged to submit those reports will be the Platform operators, as defined by DAC7.

DAC7 obliges the platform operators to report income earned by the sellers through the use of the digital platform in one single Member State. The reporting obligation should cover both cross-border and non-cross-border activities.

Moreover – DAC7 will have global impact – the reporting obligation will extend to those platform operators that perform commercial activity in the Union but are neither resident for tax purposes, nor incorporated or managed, or have a permanent establishment in a Member State (‘foreign platform operators’). In this relation – the operators will be required to register and report in one single Member State for the purpose of operating in the internal market.

The foreign platform operators may be relieved from an obligation to report to the tax authorities of a Member State in cases where adequate arrangements exist, ensuring that equivalent information is exchanged between a non-Union jurisdiction and a Member State and as long as the information received by the Member State relates to the activities in the scope of the Directive and the information is equivalent to the information required under the reporting rules set out in the Directive.

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