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DAC7: reporting rules for digital platforms and online sales

Trading through online platforms like Amazon and Vinted is increasingly gaining traction. Items are sold and transported from one country to another through dropshipping, sometimes even without the seller’s direct involvement. Selling from one’s own stock of second-hand items is also conceivable. For all these international web-based transactions, the EU Data Exchange Digital Platforms Directive (DAC7) is a new addition to the already existing European Directive 2011/16/EU. These directives focus on administrative cooperation in taxation. But why should DAC7 matter to you?

What is DAC7?

The new European Directive DAC7 has been implemented in the Netherlands with the Act Implementing the EU Data Exchange Directive Digital Platform Economy. DAC7 introduces the obligation for platform operators to collect, verify and report data on sellers operating via their digital platform. This includes data relating to sellers’ activities on the sale of goods, provision of personal services and rental of real estate and means of transport. This means that platform operators are required to report data on sellers using their digital platform, including their income, to tax authorities. These reports, shared across EU tax administrations, unveil seller earnings, potentially flagging tax obligations.

The implications of DAC7 could mean EU tax bodies identifying platform sales as taxable income for the seller, possibly leading to tax dues. For already registered entrepreneurs, this also means that data from the reports can be matched with their accounts and returns. In doing so, a mismatch can lead to additional tax payments.

Why is DAC7 important?

In principle, platform operators are required from 1 January 2023 to keep records of sellers on their digital platform and report them to tax authorities annually. The DAC7 directive is important because it ensures more tax transparency in the digital economy. The digitization of the economy and the rise of cross-border digital platforms have led to less oversight of activities taking place through digital platforms. This increases the risk that sellers do not (fully) declare income generated through digital platforms in their tax returns, leading to unfair competition with traditional businesses, among other things.

In order to achieve better insight, a uniform reporting requirement has been introduced. Through these reports, information on sellers using digital platforms is transmitted to EU tax authorities. Incidentally, sellers are sometimes not even aware of the fact that there may be a source of income that could lead to a taxable result from other activities or profit from business when selling via digital platforms. In terms of taxes, this includes, in particular, income, corporate and sales tax.

Navigating DAC7 Requirements

DAC7 leads to a uniform reporting obligation for platform operators. Platform operators will need to take action. They have to meet their obligations under DAC7. The reporting obligation for the year 2023 is already underway. Failure to comply with obligations could lead to fines. For sellers, a thorough analysis of digital platform sales and potential tax repercussions is prudent.

Would you like to assess the impact of DAC7 on your online shop or online platform? Then contact us, one of our experienced advisers will be happy to help you.

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ArticlesDAC7: reporting rules for digital platforms and online sales