DAC7 - the reporting obligation for digital platforms

Business models with digital platforms are booming: accommodation, car hire, removals, electrical appliances, clothing and toys - goods and services of all kinds are now being sold commercially on digital platforms. Time and again, however, this bypasses the tax authorities.

The EU states are thus losing out on tax revenue, partly because they currently lack an instrument for determining and monitoring sales. In addition, this practice of digital platforms represents unfair competition against bricks-and-mortar retail.

The EU is counteracting this with Directive (EU) 2021/514 of 22 March 2021. It obliges the operators of digital platforms to disclose information about the transactions of their registered sellers to the European tax authorities. Specifically, this relates to the income they generate through the commercial use of the platform - regardless of whether the service or goods were billed via the platform or otherwise.

The new due diligence and reporting obligations were transposed into German law on 1 January 2023 with the Tax Transparency Act. Although there are still some unanswered questions, the new reporting obligation will apply to all relevant business transactions in 2023 as early as 31 January 2024 and will then apply both to operators of digital platforms in the EU and in third countries as well as to sellers on these platforms. Relevant activities include, for example, the rental of real estate, the provision of personal services, the sale of goods and the rental of means of transport.

The first mandatory declaration for 2023 was originally scheduled for 31 January 2024. This date was postponed by the Federal Central Tax Office by two months to 31 March 2024. This extension is only expected to apply to 2023.

Some countries, such as the Czech Republic, have already started the legislative process to implement the DAC7 Directive.

Platform operators now face the following challenges:

1. Analysing who is affected: Does the respective platform fall under the reporting obligation under DAC7?
2. Data procurement: How do the platform operators obtain the data?
3. Data protection: To what extent do the GTCs need to be adapted?