What is DAC7?
What is DAC7?
DAC7 introduces new reporting requirements for both EU and Non-EU Platform Operators which allow Sellers to be connected to users in order to carry out Relevant Activities through their digital Platform (website or application). Relevant Activities include:
Further, Sellers are users (either individuals or entities) registered on the Platform to carry out Relevant Activities for consideration (i.e., any compensation, net of fees, commissions or taxes withheld or charged by the Platform Operator).
Platform Operators need to collect, verify and report to the Competent Authority of an EU Member State the information of Sellers domiciled in the EU and Sellers renting out immovable property located in the EU. The Sellers’ information will be automatically exchanged among the Competent Authorities of the EU Member States, who will use this information to ensure that Sellers earning revenue through Platforms are duly taxed.
Platforms Operators are required to report by 31 of January of the year following the reportable calendar year the information of Sellers carrying out Relevant Activities via their Platform. Failure to comply with DAC7 may result in penalties and even prosecution.
Note that determining whether you are a Platform Operator with reporting obligations may not be a straightforward exercise. BDO Netherlands has created a smart tool that can assists you in determining whether you are a Platform Operator. The assessment is done through an web-based questionnaire following a decision-tree logic. As result, a detailed report is issued answering whether you qualify as a Platform Operator, whether you have an obligation to report under DAC7 and the type of Sellers that you should report.
BDO Netherlands can assist you along this whole process by identifying the impact of DAC7 on your business, helping you to implement the collection and due diligence procedures, and supporting you in the compliance of the DAC7 reporting obligations with the Competent Authority. For this purpose, BDO Netherlands has developed tools to facilitate this work, namely:
Would you like to know more? Please contact one of our advisers.
- Renting immovable property;
- Providing personal services;
- Selling tangible goods; and
- Renting any mode of transport.
Further, Sellers are users (either individuals or entities) registered on the Platform to carry out Relevant Activities for consideration (i.e., any compensation, net of fees, commissions or taxes withheld or charged by the Platform Operator).
Platform Operators need to collect, verify and report to the Competent Authority of an EU Member State the information of Sellers domiciled in the EU and Sellers renting out immovable property located in the EU. The Sellers’ information will be automatically exchanged among the Competent Authorities of the EU Member States, who will use this information to ensure that Sellers earning revenue through Platforms are duly taxed.
Platforms Operators are required to report by 31 of January of the year following the reportable calendar year the information of Sellers carrying out Relevant Activities via their Platform. Failure to comply with DAC7 may result in penalties and even prosecution.
Are you in scope or out of scope?
If you are a Platform Operator with reporting obligations, it becomes necessary to immediately take all steps required to implement the due diligence procedures and to comply with the reporting requirements set out in DAC7.Note that determining whether you are a Platform Operator with reporting obligations may not be a straightforward exercise. BDO Netherlands has created a smart tool that can assists you in determining whether you are a Platform Operator. The assessment is done through an web-based questionnaire following a decision-tree logic. As result, a detailed report is issued answering whether you qualify as a Platform Operator, whether you have an obligation to report under DAC7 and the type of Sellers that you should report.
How can you comply with DAC7 reporting obligations?
Ensuring compliance with DAC7 reporting obligations requires the execution of an important number of steps. Some of these may take a relative long period of time to execute, depending on your internal systems and the number of stakeholders that may need to be involved. The more important of these steps are listed below:- Analyzing the legal implications of collecting and storing the Sellers information required by DAC7. In particular, if the agreements concluded with the Sellers allow for it.
- Assessing the scope and quality of the Sellers information already available.
- Contacting the Sellers and informing them about DAC7, as they may need to cooperate in the collection of the information.
- Implementing or modifying internal systems to further collect the Sellers information.
- Adopting a validating procedure to verify the reliability of the information, whether by using publicly available electronic interfaces or by subcontracting a third party service provider.
- Where the reporting obligation may exists in more than one EU Member State, electing the EU Member State in which you will comply with the reporting obligations and notifying the rest of the Competent Authorities of the election.
- Electing the EU Member State in which you will comply with the reporting obligations and registering with its Competent Authority, if you are a Non-EU Platform Operator but need to comply with DAC7 because you have reportable Sellers domiciled in the EU or reportable Sellers renting out immovable property located in the EU.
- Prepare and file the DAC7 report with the Competent Authority, which includes: name, address, TIN, VAT identification number, total consideration paid or credited during each quarter of the reportable period, number of relevant activities in respect of which the Consideration was paid or credited during each quarter of the reportable period, and fees, commissions or taxes withheld or charged during each quarter of the reportable period.
- Letting know each Seller about the reported information so that they can know which information has been provided to the Competent Authority.
- Recording the steps undertaken and any information relied upon for the performance of the due diligence procedures and the DAC7 reporting obligations.
BDO Netherlands can assist you along this whole process by identifying the impact of DAC7 on your business, helping you to implement the collection and due diligence procedures, and supporting you in the compliance of the DAC7 reporting obligations with the Competent Authority. For this purpose, BDO Netherlands has developed tools to facilitate this work, namely:
- The DAC7 Excel tool for the collection of the Sellers’ information. This tool includes filters that help with stripping out the unnecessary data from a dataset based on the type of Sellers and Relevant Activity to be reported. It also provides recommendations on the correct format to be used for reporting the data based on the EU Commission’s DAC7 XML Schema.
- The DAC7 XML converting tool that transforms the data referred to above into XML files compliant with the applicable technical requirements.
Would you like to know more? Please contact one of our advisers.