Introduction
Over the past years, the digital economy has grown significantly. This also led to an increase of cross border supplies and to an increase of sellers not reporting their cross border income or not reporting it in the correct State. The aim of DAC7 is to create more transparency of (taxable) activities on digital platforms and the correct allocation of income generated on these platforms to EU member states. For Dutch tax purposes, this may be relevant for, among others, the personal income tax, corporate income tax and value added tax.
The transparency will be achieved through the implementation of reporting obligations for digital platforms operating anywhere in the EU and the automatic exchanges of the reported information between the tax authorities of EU member states.
Digital platform and platform operators
A platform is any software – for example a website or app – which allows a seller to carry out a relevant activity (see hereinafter) to a user of that platform. The platform operator is the entity that contracts with sellers to make the platform (such as a website) available to them. In order to qualify as a platform, it is not necessarily required that the seller supplies the relevant activity directly to the user of the platform.
Reporting platform operators
The requirement to collect, verify and report information of sellers applies to so-called reporting platform operators.
A reporting platform operator is an entity:
- tax resident of an EU member state;
- incorporated under the laws of an EU member state;
- which has its place of effective management in an EU member state; or
- which has a permanent establishment in an EU member state.
A platform operator that is not in any of the above mentioned situations, but does facilitate the carrying out of a relevant activity by reportable sellers or involving the rental of immovable property located in an EU member states nevertheless qualifies as a reporting platform operator. Therefore, platform operators that solely operate outside the EU may still be required to collect, verify and report information of sellers on their platform. These platform operators are required to register with a (tax) authority of a single EU member state and report the relevant information to that authority.
Some non-EU platform operators are exempt from the reporting requirement if they are resident of a jurisdiction that has an agreement in effect with all EU member states which requires the automatic exchange of information equivalent to the information that has to be reported on the basis of DAC7.
The reporting platform operator only has to register with and report to one EU tax authority, as the tax authorities will automatically exchange the reported information with the other tax authorities.
Reportable sellers and relevant activities
The reporting platform operator has to report information of reportable sellers to the tax authority. A reportable seller is an individual who or an entity (regardless of its legal status) that is resident in an EU member state or is renting out immovable property located in an EU member state and was registered on the platform of the reporting platform operator at any moment during the reportable period. A seller is for example registered on a platform if it has an account on that platform.
A relevant activity is one of the activities as listed below carried out for remuneration (the amount of which is known or reasonably knowable to the reporting platform operator):
- the rental of immovable property, both residential and commercial and any other immovable property and parking spaces;
- a personal service;
- the sale of goods; or
- the rental of any mode of transport.
Any of these activities carried out by a seller who acts as employee of the digital platform operator is not a (reportable) relevant activity.
The obligation to report information applies for cross border as well as domestic relevant activities. This means that the relevant information of a Dutch seller that carries out a relevant activity on a digital platform operated by a Dutch platform operator, still needs to be collected, verified and reported to the (Dutch) tax authorities.
Under certain circumstances, information of tour operators and hotel chains operating as sellers on a digital platform do not have to be reported. The platform operator furthermore does not report information of
- a seller of goods for which the reporting platform operator facilitated less than 30 relevant activities for a total consideration not exceeding € 2.000;
- governmental entities; and
- certain sellers that are listed on a stock exchange.
Information that has to be collected, verified and reported
The reporting platform operator has to report its name, registered office address, tax identification number (TIN) and the business name (and number) of its platform.
The reporting platform operator needs to collect, verify and report, among others, the following information of reportable sellers:
- the consideration paid or credited to the seller during each quarter of the reportable period;
- the number of relevant activities as carried out by the seller during the reportable period;
- any fees, commissions or taxes withheld or charged by the reporting platform operator;
- the seller’s first and last name or legal name;
- the financial account identifier of the seller;
- the primary address of the seller;
- any TIN issued to the seller, in absence and when relevant, the place of birth of the seller;
- the VAT identification number of the seller;
- if applicable, the date of birth of the seller;
- the business registration number of the seller;
- the existence of any permanent establishments in the EU through which relevant activities are carried out by the seller.
If the seller rents immovable property located in the EU, the reporting platform operator is also required to report information on the address of the immovable property and the land registration number (or its EU member state equivalent) of the property.
Before reporting the relevant information to the tax authority, the reporting platform operator has to verify the information. To verify the TIN and/or VAT identification number of the seller, the operator must use all information and documents (freely) available to him. The reporting platform operator is also required to inform the seller that is has reported information of the seller to the tax authority.
The Dutch government will introduce more specific information with regard to the collection and reporting requirements through a statutory instrument, which will strictly follow the EU directive (DAC7).
Entry into force
This new legislation entries into force on 1 January 2023. The reporting platform operator is obliged to report relevant activities that were carried out as of that date.
The relevant information must be reported to the tax authorities every calendar year. The reporting platform operator has to make sure that the relevant information is collected and verified on or before 31 December of each calendar year. It subsequently has to report the information before 31 January following the end of the relevant calendar year. This means that after entry into force of the legislation on 1 January 2023, the reporting platform operator needs to have collected and verified information of reportable sellers at the latest on 31 December 2023 and report this information before or on 31 January 2024.
Information of reportable sellers on a platform of a reporting platform operator that registered on the platform before 2023, need to be first collected and verified at the latest on 31 December 2024 and reported to the tax authority on or before 31 January 2025.
If the reporting platform operator does not (on time) comply with its reporting obligations, it may face, depending on facts and circumstances, criminal charges or a fine of the sixth category (€ 900.000 in 2022 in the Netherlands).
Final remarks and next steps
As of 1 January 2023, reporting platform operators are required to collect and verify information on reportable sellers. This also applies if the relevant activities as performed by the seller are carried out exclusively outside the Netherlands. The information has to be reported to the tax authority with which the reporting platform operator is registered. The tax authority will automatically exchange the information with other tax authorities of EU member states. If the reporting platform operator does not comply with the reporting obligations, it may face criminal charges or a fine.
It is thus important to analyze if an entity within your organization qualifies as a reporting platform operator. In that case it is necessary to analyze the relevant activities of reportable sellers on your platform before 2023 and make a plan on how to:
- collect and verify the relevant information of reportable sellers; and
- report the information (on time) to the tax authorities.
It is recommended to implement such a plan in the tax control framework of your organization.
Should you require additional information or have questions about the above, please do not hesitate to contact us. We are able to help you and analyze the consequences of the reporting obligations for your organization.