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Friday, 09 April 2021

New EU tax transparency rules for digital platform operators officially adopted and published: DAC 7 enters into force in 2023

The European Union Member States agreed to a new measure to tackle the challenges they face when taxing the digital economy. One of the crucial elements for this to succeed is obtaining the right and correct information. Instead of implementing additional tools to have the national tax administrations seek and collect that data, this task is now in fact outsourced to digital platform operators. By adopting the so-called Directive on Administrative Cooperation 7 (Council directive 2021/514 of 22 March 2021, “DAC 7”, click here), digital platform operators will now have to take proactive measures to comply with their new data collecting and “public” information sharing task.

In brief, DAC 7 intends to enhance EU tax transparency rules. It obliges digital EU and non-EU platform operators that facilitate the provision of relevant domestic and cross-border activities to the collection and sharing of data on the sellers which they offer their facilitation services. This data includes, among others, the sellers’ name, registered office address, tax identification number, VAT number (where available), date of birth (where required), each member State of residence of the seller, the sales price and the amount(s) retained by the platform. The relevant activities in scope include the letting of immovable property, personal services (eg. baby-sitting), sales of goods and renting out any mode of transport.

The previous DAC provisions (Council Directive 2011/16/EU of 15 February 2011 and its 5 amendments) did not yet cover platforms facilitating such activities. By amending the DAC again, platform operators now must implement a detailed procedure to collect the necessary information (to be completed by 31 December 2023), annually report this collected information to the tax authorities (first time by 31 January 2024) as well share the information they collected from/to the respective seller (first time by 31 January 2024).

Next to targeting the digital economy, DAC 7 also addresses the following topics:

  • Information on royalty payments will also have to be shared among EU tax administrations.
  • EU tax administrations will be allowed to conduct joint tax audits.
  • EU tax administrations will be allowed to address group requests for information without identifying a specific subject.

EU Member States must implement the new measures by 31 December 2022. In this respect we are eager to know how Belgium will comply, mainly which (pragmatic) approach it will take. You may remember the hiccups DAC 6 (Council Directive 2018/822 of 25 May 2018) caused during its actual implementation into practice. Also, what this will mean for the semi DAC7-reporting obligation Belgium has already implemented in its tax legislation (click here for our previous post in this respect)? Will this be abolished fully or remain to co-exist? The existing obligation for digital platform providers to inform all its users offering services through the platform of their Belgian social and tax obligations, is not compulsory under DAC 7. Will this existing rule be upheld, expanded or abolished? In any case, what is clear, is that the scope, both on the subject and object side for reporting purposes, will need to be broadened.

Lastly, we briefly want to inform you on two other matters that are interesting for the digital economy:

  • DAC 8 (click here) is also already in the pipeline extending the scope of the DAC-provisions to also include virtual crypto-assets.
  • Recently the Office of the US Trade Representative announced to – for now – terminate its well-known Section 301 Digital Services Taxes Investigations on the European Union given that there are no such rules adopted yet (click here).

Tiberghien’s international tax team will continue to monitor these developments. In case you have any further questions here or want to discuss this, please do not hesitate to contact the author.

 

Gert Vranckx  - Senior Associate (gert.vranckx@tiberghien.com)

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