Impact of DAC7 on marketplaces
What is DAC7
The EU is introducing new measures, known as DAC7, to increase tax transparency in the digital economy. The Directive introduces reporting obligations for Digital Platform Operators, who make their platform available to Reportable Sellers, in order to identify, trace, and report on revenues made by sellers on their digital platforms. These measures are intended to ensure that Member States can automatically exchange information on Reportable Sellers on digital platforms, whether the platform is located in the EU or not.
Digital Platform Operators that are not located in the EU will be required to register in a Member State in order to comply with DAC7. The reported data will be used for both income tax and VAT purposes, and may help tax authorities to trace and detect taxable events in the digital economy. Digital Platform Operators that are subject to DAC7 will need to design and implement seller due diligence procedures and the required reporting infrastructure in preparation for the first reporting deadline.
The commercial activities in scope are broadly formulated, and include the rental of immovable property, personal services, the sale of goods, the rental of any mode of transport and investing. Note that not all activities on a platform are in scope. Digital platforms that exclusively process payments, list or advertise or redirect or transfer users to a platform are under conditions not in scope.
What is the Operators' responsibility in regard to DAC7?
Digital Platform Operators that are in scope of DAC7 are subject to:
Registration in a single member State, regardless of whether the Digital Platform Operator is located in the EU or in a third country
Ongoing seller due diligence procedures to establish a.o. the tax residence of sellers and monitor for relevant changes in circumstances
Annual reporting on sellers and their revenues generated on the digital platform to the competent authority in the EU member state where you are registered
How can you automate and optimize DAC7 requirements
There are several ways in which Digital Platform Operators (DPO) can automate the processes related to DAC7 requirements. Some potential approaches include:
Automating the identification and tracking of Reportable Sellers: DPOs can use software or other automated systems to identify sellers who meet the criteria for reporting under DAC7, and track their revenues and other relevant data.
Automating the preparation and submission of reports: DPOs can use automated systems to compile the necessary data for DAC7 reports, and to generate and submit the reports to the relevant Competent Authority.
Implementing seller due diligence procedures: DPOs can use automated systems to perform seller due diligence, including verifying the tax residency of sellers and monitoring for relevant changes in circumstances.
Using technology to facilitate data exchange: DPOs can use technology such as APIs (Application Programming Interfaces) or other secure systems to facilitate the exchange of information with other member states.
By automating these processes, DPOs can improve the efficiency and accuracy of their DAC7 compliance efforts, while also reducing the risk of errors or omissions.
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