Czech Republic: Proposed implementation of directive for income earned by digital platforms (DAC7)

The Czech Ministry of Finance has prepared a bill to implement the seventh directive on administrative cooperation (DAC7) in the field of taxation directive—the directive for EU Member States to collect and automatically exchange information on income earned by sellers on digital platforms. As proposed, the measures in the Czech Republic would be effective beginning 1 January 2023. 

DAC7 was adopted by the European Council in March 2021 and is to be implemented by the EU Member States by 31 January 2022. DAC7 aims to provide a level playing field for all digital platforms and to prevent unfair competition.

The new reporting obligation would apply to platforms that facilitate carrying out selected activities for consideration. Four areas of reportable activities would be:

• Provision of immovable property
• Provision of means of transport
• Provision of personal services
• Sales of goods

Reportable activities concerning immovable property would include not only rentals, but also the provision of accommodations and other manners of providing immovable property. A personal service would be defined to mean time- or task-based work performed by an individual (natural person), such as a transportation service provided by a driver, thereby distinguishing this transportation service from the provision of means of transport.

A platform would be software allowing sellers to be connected to other users for the purpose of conducting a reportable activity for such users.  A platform operator could be a legal person or an entity without a legal personality (though not an individual) that contracts with platform users (sellers) to make available to them all or part of the platform allowing them to connect with the users of the reportable activities. Sellers would be platform users that conduct or intend to conduct a reportable activity. Some platforms and sellers would excluded from the reporting obligation, subject to meeting stipulated conditions. 

• Reportable information would include selected information about the platform, its operator, sellers, and effected transactions.
• The information would be reported by 31 January of the year following the year being reported. The first-time reporting, for year 2023, would take place by 31 January 2024.
• Operators would have to report information on their activities in the entire EU in a single elected EU Member State. Information thus obtained would be shared with the EU Member States concerned, thereby allowing tax administrations across the EU with information on transactions effected through digital platforms and lead to the identification of transactions that might otherwise not be declared in tax returns. Although the reporting obligation itself would only apply to platform operators it would, indirectly, also affect all that are commercially active on the platforms.
• Under the currently proposed measures, if a platform operator breaches the reporting obligations, there would be penalties up to €60,000 for each case of breach.

Read an October 2021 report prepared by the KPMG member firm in the Czech Republic