24 Oct 23
DAC7: Additional Reporting requirements for digital platform operators
31 January 2024 Deadline
The digitalisation of modern world economies is accelerating at a rapid pace. The cross-border nature of the economic activities on digitalised economies presents a new challenge for tax authorities in enforcing domestic and international tax compliance.
In response to this challenge, the European Union introduced the 7th Directive (2011/16/EU) on Administrative Cooperation, more commonly known as “DAC7” in 2021. This directive was transposed into Irish law through the Finance Acts 2021 and 2022.
The directive extended the scope of the existing automatic exchanges of information (AEOI) between the EU member states to digital platforms. Under DAC7, digital platform operators are required to collect, verify and report certain information on sellers who utilise their platforms on an annual basis.
Digital platform operators are typically websites, mobile apps and computer applications that enable sellers to connect with customers for the sale of goods and services. Digital platform operators will fall under the scope of DAC7 when they connect sellers with customers for one of the following reportable activities:
Sale of goods;
Provision of personal services (including work carried out online or physically offline after having been connected via the digital platform);
Rental of immovable property; and
Rental of any mode of transport.
Reporting platform operators are those that are either tax resident or incorporated in an EU member state or have a place of management or permanent establishment in a member state. Non-EU based platform operators may still have an obligation to report where they either facilitate the carrying out of relevant activities by reportable sellers or facilitate the rental of immovable property located in an EU member state.
A reportable seller is a seller (other than an excluded seller) that is resident in a member state and is engaged in reportable activities or a seller that rented out immovable property in a member state.
There are several seller types that are excluded from the reporting requirements:
Publicly traded companies.
Government and state bodies.
Sellers with more than 2,000 transactions per annum.
Sellers for which the platform operator facilitated less than 30 relevant activities by means of the sale of goods and for which the total amount of consideration paid or credited did not exceed €2,000 during the reportable period.
Registration and reporting requirements
Reporting platform operators must collect and verify the information from ‘reportable sellers’ utilising their platforms, and report annually. 2023 is the first year for which reports must be filed and the deadline for reporting this information is 31 January 2024.
Platform operators are required to file a report with the tax authority of the EU member state where they are tax resident. Where an operator is resident in multiple member states, they are only required to register and report in one.
Reporting platform operators must register with the Irish Revenue Commissioners for DAC7 purposes by 30 November 2023.
Digital platform operators are required to collect the following information from reportable sellers using their platforms:
Personal details of sellers including name, address and date of birth (for individuals).
VAT and tax identification number.
Company registration number.
Details of any permanent establishment through which relevant activities are carried out in the EU.
Where relevant, details on whether the reportable activities involve immovable property.
Any fees, commissions or taxes withheld or charged by the digital platform operator.
Total consideration paid or credited during each quarter and the number of relevant activities.
For property rental arrangements, details of the rental dates and addresses of the properties.
Platform operators are responsible for determining whether information collected is reliable with reference to their own records, electronically searchable records and/or other means of due diligence. If the disclosed information is determined to be unreliable, the operator must ask the seller to provide a clarification.
Where there are delays from reportable sellers in providing information and appropriate reminders have been sent, operators shall close the user account to any further transactions. Such closure should occur if 60 days have elapsed since the last reminder without a response. Re-registration should also be blocked for as long as the seller has not disclosed the required information.
Sanctions for non-compliance are at the discretion of each EU member state. Under Irish law, the penalties for non-reporting platform operators include an initial penalty of €19,045 and an additional penalty of €2,535 for each day a report remains outstanding.
Digital platforms must act now to prepare for the upcoming 31 January 2024 deadline by reviewing their operations to determine if they will be in the scope of the DAC7 reporting obligations.
For in scope entities, they must establish robust processes for collecting and storing relevant information from reportable sellers, reviewing data validation and due diligence procedures, updating terms and conditions, and considering data protection implications for any data collection.
For further information, please contact Henry Barrett.