EU Directive on Administrative Cooperation (DAC7) for Digital Platforms

The EU has introduced Directive (EU) 2021/514 (DAC7) to ensure greater tax transparency in the digital economy in the EU. The implementation of this Directive in the Netherlands means that as of 1 January 2023, platform operators will be required to provide information on sellers making use of these platforms, such as their income, to the tax authority.

General information about DAC7

• What is DAC7?

  DAC7 is a new addition to the existing Council Directive 2011/16/EU dealing with administrative cooperation in the field of taxation. The new European Directive DAC7 is implemented in the Netherlands with the Act Implementing the EU Data Exchange Directive Digital Platform Economy.
  
  This bill introduces the requirement for reporting platform operators to collect, verify and report data and information on reportable sellers conducting relevant activities through their digital platforms.

  With the digitalisation of the economy and the rise of digital platforms carrying out cross-border activities, tax authorities have less visibility on activities carried out through digital platforms. As a result, there is a risk that sellers may not (fully) declare their income via digital platforms in their tax returns. This also distorts competition with traditional companies.
  
  To eliminate that risk, a uniform reporting requirement for platform operators has been developed (DAC7). Tax authorities of EU Member States automatically exchange information from the reports. This gives them access to information on income earned by sellers through these platforms and allows them to assess taxes due.
  
  Under DAC7, platform operators are required from 1 January 2023 to collect and annually report information on sellers on their digital platforms to the tax authority of an EU Member State.
  
  Subsequently, the EU Member State to which the information is reported is required to automatically exchange this information with the tax authority of the EU Member State in which the reportable seller is a resident and, if the seller rents out immovable property, with the competent authority of the EU Member State in which the immovable property is located.
  
  Platform operators must also inform their sellers which data they pass on to the tax authorities.
  
  In addition to the provisions of Directive (EU) 2021/514 concerning the extension of the automatic exchange of information on income obtained through the platform economy, this directive introduces a number of other amendments to Directive 2011/16/EU, for example with regard to the legal protection of taxpayers in joint investigations, joint audits and data protection.
  
  Infographic general (only available in Dutch).

Information for Platform Operators

• What is a digital platform, and what is not?
  

  A digital platform is any software, such as a website or an app, that enables sellers to be connected to users of that software to carry out a relevant activity. It also includes anything required for payment (collection and payment) of a consideration related to the relevant activity.
  
  There is no digital platform if the software is only used to:

  • process payments for a relevant activity
  • advertise a relevant activity
  • redirect users to a platform, as in case of search engines
• What is a platform operator? 

  A platform operator is an entity that enters into an agreement with sellers to make all or part of the platform available to the sellers.

• Which platform operators are required to report? 

  Platform operators are required to collect, verify and report information on sellers using their digital platforms if the platform operator is a resident for tax purposes of an EU Member State. Platform operators who are not residents for tax purposes of an EU Member State must collect, verify and report information on sellers if:

  • the platform is incorporated under the laws of an EU Member State
  • the (effective) management of the platform is located in an EU Member State
  • the platform has a permanent establishment in an EU Member State

  The reporting requirement also applies to platform operators who are not residents of an EU Member State if the sellers performing relevant activities on their platforms have EU Nexus. EU Nexus means that these sellers are residents of an EU Member State, or rent out immovable property located in an EU Member State.

  The reporting requirement applies to cross-border as well as non-cross-border activities.
  
  Check if you are a platform operator and are required to report (only available in Dutch).

• When is a platform operator not required to report?

  Platform operators who can demonstrate that no reportable sellers are active on their platforms can apply for 'excluded platform operator' status. 'Excluded platform operator' status must be established by 31 January of the year following the calendar year they have to report on. Platform operators can also apply for 'excluded platform operator' status earlier so they do not have to carry out collection and verification activities.
  
  Apply for excluded platform operator status (only available in Dutch).

• What is a relevant activity?

  This concerns the following activities:

  • rental of immovable property located in an EU Member State
  • provision of personal services
  • sale of goods
  • rental of means of transport

  Activities of sellers who are employees of the platform operator or of an entity affiliated with the platform operator do not count as a relevant activities.

• What is a consideration?
  A consideration is a payment in any form paid or credited to a seller for a relevant activity from which all fees, commissions or taxes withheld or charged by the platform operator have been deducted.
  
  For compensation to be considered 'paid' or 'credited', the amount paid or credited to the seller must be in an account specified by the seller, even if this account is not in the seller's name.
  
  An important condition is that the amount of the consideration is known or could reasonably be known to the platform operator. To assess this, the tax administration draws on knowledge from relevant service providers and other platform operators.
  
  If a platform operator is not aware, or cannot reasonably be aware, of the amount of the consideration paid or credited to a seller for the relevant activity, the conditions applicable to a consideration are not met. If there is no consideration, there is also no relevant activity.
• What is the switch off mechanism for registering and reporting?
  
  As tax authorities worldwide face challenges related to the ever growing digital platform economy, international cooperation with countries outside the EU is essential. Similar rules apply to platform operators in the OECD (Organisation for Economic Cooperation and Development). There is a 'switch-off mechanism' to avoid duplicate information and reduce the administrative burden on digital platform operators.
  
  

  Full switch off

  The full switch off applies to foreign platform operators who are residents for tax purposes in a non-Union jurisdiction that is an OECD Member State, if that jurisdiction has concluded an agreement on automatic exchange of information:

  • equivalent to the information exchanged under DAC7, and
  • with the competent authorities of all EU Member States

  The full switch-off means that these foreign platform operators do not have to register in an EU Member State or to report to an EU Member State.
  
  A foreign platform operator only needs to pass on information about sellers to the tax authority of the non-Union jurisdiction where the platform operator is established. Those authorities automatically exchange this information with the tax authorities of EU Member States in which the sellers are resident.
  
  

  Partial switch off

  The partial switch off applies to foreign platform operators who are residents for tax purposes in a non-Union jurisdiction that is an OECD Member State, if that jurisdiction has concluded an agreement on automatic exchange of information:

  • on some relevant but not all activities covered by Directive (EU) 2021/514 (DAC7),
    or
  • with some, but not all, EU Member States

  This means that while these foreign platform operators must register in an EU Member State, they do not have to report overlapping information twice (i.e. to both the competent authority of the non-Union jurisdiction and to the EU Member State where they are registered).
  
  The partial switch-off is designed to prevent platform operators from providing the same type of data more than once.

• Which data must platform operators report?

  A platform operator must report both its own data and that of the sellers.

  Details of the reporting platform operator include:

  • Name
  • Address
  • Tax identification number (TIN)
  • Platform business name(s)
  • Platform web address

  Details of the reportable seller include

  • First and last name or legal name of the seller
  • The seller's primary address
  • The seller's date of birth (if applicable)
  • The seller's VAT identification number
  • The seller’s financial account identifier to which the consideration is paid or credited
  • The seller's tax identification number (bsn, RSIN) indicating the Member State where it was issued
  • The seller's business registration number (if applicable)
  • The existence of any permanent establishment through which relevant activities are carried out in the Union by the seller
  • Details of the address of the immovable property and the land registration number if the seller rents out immovable property in the EU
  • Total consideration paid or credited per quarter
  • The number of relevant activities paid or credited for
  • Any fees, commissions or taxes withheld or charged by the reporting platform operator

  When to report?

  All information on when to report can be found at 'At which moments must platform operators report?'

• What is a reportable seller?

  A seller on a platform is a natural person or an entity who is a resident in an EU Member State or rents out property located in an EU Member State. That person is registered on the platform and performs a relevant activity for a consideration during the reportable period.

  Please note:
  It makes no difference to the reporting requirement whether a seller uses the platform as an entrepreneur or as an individual. Nor whether the seller makes a profit or a loss.

  Which information must platform operators report about sellers?

  An overview of the information a platform operator must report can be found under 'Which data must platform operators report?
• On which sellers is reporting not required?
  

  Excluded sellers

  Digital platform operators are not required to report on specific categories of sellers.

  These include:

  • governmental entities
  • listed companies or an affiliated (>50% interest) entity thereof
  • sellers who have conducted more than 2,000 relevant activities during the reportable period for the rental of immovable property registered at the same street address
  • sellers who performed fewer than 30 relevant activities with an equivalent value of less than €2,000 during the reportable period. This condition only applies if it involves the sale of goods, i.e. not the provision of personal services or the rental of means of transport.
    
    

    Platform operators are also not required to report on

    • sellers who receive no compensation (there is no consideration)
    • sellers who have agreed with the buyer on a fee that the platform is not aware of (or cannot reasonably be aware of)
    • sellers performing a relevant activity as an employee of a platform operator or of an entity affiliated to the platform operator.
• At which moments must platform operators report?

  Platform operators must report information on their sellers per calendar year to the tax authority of the EU Member State where the platform is based. Platform operators must have collected and verified this information by 31 December of the calendar year on which they report. After that, they must report this information to the tax authority by 31 January of the following calendar year.

  Platform operators must therefore report information on their sellers to a tax authority by 31 January 2024 for the calendar year 2023.
  
  

  Exception for existing sellers

  There is a one-time different reportable period for sellers already registered on a digital platform as of 1 January 2023; and for sellers already registered on a digital platform as of the date an entity becomes a reporting platform operator.
  
  The collection and verification requirements on sellers already registered on the platform as of 1 January 2023 (so-called 'existing sellers') must be completed by 31 December 2024. Platform operators must report information on these sellers by 31 January 2025.
  
  The information to be reported only concerns the year in which the seller is identified as a reportable seller. If that is the case in 2024, the reporting requirement will only cover 2024. If the collection and verification requirements are already met in 2023, and the existing seller is therefore already classified as a reportable seller in that year, the reporting obligation will also cover that year.
  
  

  When must platform operators inform their sellers?

  Platform operators must disclose to sellers on their digital platforms which information they pass on to the tax authorities of the relevant EU Member State. They must do so no later than 31 January of the year following the calendar year in which the seller carried out relevant activities for a consideration on the platform. This is the same time the platform operator must provide the information to the tax authorities, at the latest.
  
  This way, sellers know what information about them has been reported to the tax authority. This information includes a summary of the total consideration paid or credited to the seller, shown by quarter of the reportable period.
  
  The seller can use this statement as an aid for tax returns.
  
  

  Correcting data

  If you have submitted incorrect data, you can submit a correction notice (only available in Dutch).
  
  To be able to submit a correction, the original report must first be accepted by the tax administration (this refers to the technical validation, not the substantive assessment of the report). A correction means that the entire notification (i.e. including the unchanged fields) must be resubmitted.
  
  

  Timeline

  Check the DAC7 timeline for platform operators (only available in Dutch).
• How should platform operators report?
  
  
  From January 2024 you can provide data and information about sellers via Digipoort. More information about Digipoort can be found on the Logius website.
  
  

  Registering as a foreign platform operator

  To ensure the data-sharing system works properly, to create a level playing field and to counter unfair competition, the reporting requirement may also apply to digital platforms that are not residents for tax purposes in an EU Member State but operate within the EU. This is the case if they facilitate sellers from a non-Union jurisdiction to carry out relevant activities. In short, this involves sellers who are resident in an EU Member State or rent out property located in an EU Member State. In that case, foreign platform operators must register in one EU Member State for the activities of those sellers. After that they fulfil their reporting obligations there.
  

  Do you want to register as a foreign platform operator? You can do that through the application process.
  
  Register as a foreign platform operator (only available in Dutch).

  Notification

  If platform operators are required to report data and information to the tax authorities of more than one EU Member State, they will choose which of those EU Member States they fulfil their reporting obligations in. The platform operator notifies the tax authorities of all EU Member States affected by this choice. Do you want to inform the tax authorities that the platform operator reports in another EU Member State? You can do so by using the notification process.
  
  Notification Form of Compliance with Reporting Obligation in Another Member State (available in Dutch only).
• What happens if a platform operator fails to report?
  
  If you do not submit a report even though you are required to do so, you risk a (large) fine. You may also face criminal prosecution.
• What happens to the reports?
  

  After you make a notification, you will receive a message from us.

  Once your report has been received, we will (if necessary) exchange the data you transmitted with the tax authorities of EU Member States where your sellers are based or where the property your sellers rent out is located. We may also use the information from your report for our supervisory task. The Tax Administration receives additional information about sellers. We can use this data to check whether sellers incorporate this information in their tax returns.
  
  The information on sellers we receive does not automatically lead to a (higher) tax assessment. First, we must assess whether the revenue has already been reported in a tax return. There may also be commissions or other costs that need to be offset against the revenues. All this information is relevant to the tax assessment.