In addition, the legislative proposal includes improvements to existing administrative cooperation. For example, royalties would be added to the categories of income on which information is automatically exchanged between EU Member States. In addition, a framework is proposed to be introduced for the conduct of joint audits between two or more EU Member States. The rules regarding the improvements to administrative cooperation should apply as from 1 January 2024.
New reporting obligation for digital platforms
Pursuant to the Dutch proposal to implement DAC7, digital platform operators with nexus in the Netherlands will have to identify certain sellers and report information regarding sellers and certain relevant activities. The information must be shared with the tax authorities of the relevant Member States no later than 31 January of the following calendar year, i.e. the reporting deadline for 2023 is on 31 January 2024.
Reporting platform operators
According to the legislative proposal, the reporting obligation is imposed on the platform operators, as they are in a better position than tax authorities to collect and verify data regarding sellers who earn income through their digital platform.
A platform operator is the entity that contracts with sellers to make available all or part of an online “marketplace” platform to the sellers. A platform operator qualifies as a Reporting Platform Operator (RPO) if it is resident for tax purposes in, is incorporated under the laws of, has its place of management in, or has a permanent establishment in a Member State. If a platform operator does not have any presence in a Member State, it may still qualify as RPO if it facilitates relevant activities of EU sellers or the rental of immovable property located in a Member State.
Relevant activities
RPOs only need to report information regarding sellers with relevant activities. These are:
- any personal services;
- the rental of immovable property;
- the sale of goods; and
- the rental of any mode of transport.
Activities without a compensation do not qualify as a relevant activity.
The rules provide for carve-outs from reporting tax information for certain types of sellers. One of the carve outs regards a seller for whom the platform operator has facilitated less than 30 relevant activities during the reporting period and who did not earn more than EUR 2,000 from these relevant activities.
Territorial scope
The reporting obligations by platforms are meant to cover both cross-border and domestic relevant activities. Sellers either having their primary address, a tax identification number (TIN), or, for entities, a permanent establishment in an EU Member State, are all considered as EU residents for purposes of the Dutch implementation of DAC7 and therefore covered by the tax information reporting filed by the platform. Furthermore, tax information on sellers who rent out immovable property located in an EU Member State must also be reported, regardless of whether these sellers are EU resident.
As mentioned above, in principle the RPO should have a link with the EU, but some RPOs without any taxable presence in the EU may also have reporting obligations.
Information to be collected and reported
The information that RPOs are required to report (and to collect and verify beforehand, if applicable) can be broadly divided into three categories:
- information on the RPO itself, such as its registered office address, TIN and trade name of the platform on which it reports;
- information on reportable sellers, which consists partly of personal data to establish the identity of the seller, such as first and last name, address of main residence, TIN or in absence of that, place of birth, VAT identification number (if applicable), and date of birth. With regard to reportable sellers that are entities, some additional or different data such as the business registration number and certain data regarding permanent establishments are also to be reported; and
- information on data such as the volume of relevant activities and the earnings derived therefrom, and the address of the property (if applicable).
Impact assessment
The new reporting obligation will require platforms to adjust their data collection processes to make sure they avail of all necessary reportable information and are able to disclose it to the tax authorities in a timely manner. The reporting format is yet to be confirmed. The proposal may also have consequences for sellers, as Member States may decide to increase tax audits based on information received under DAC7. Furthermore, the broad scope ensures that domestic, intra-EU and third country activities are covered.
Improvements to administrative cooperation
DAC7 moreover aims to strengthen administrative cooperation between Member States.
The changes include:
- new rules for using simultaneous controls and allowing the presence of officials of a Member State during an enquiry in another Member State;
- a number of provisions that further clarify the framework and the main principles that should apply when the competent authorities of Member States choose to resort to the means of a joint audit;
- new provisions on requests of information about groups of taxpayers;
- rules on the procedure to be followed of a data breach; and
- adding royalties to the categories of income subject to mandatory automatic exchange of information.
The rules regarding the improvements to administrative cooperation should be implemented before 1 January 2024.
Next steps
The reporting obligation for platforms must be implemented in Dutch legislation by 31 December 2022. The other amendments to improve administrative cooperation must be implemented in domestic legislation by 31 December 2023. Although the first reporting moment will ultimately be 31 January 2024, RPO’s have to start collecting data from sellers performing relevant activities as from 1 January 2023. Our Transparency Team can be of help in defining which data needs to be collected and verified.
We will keep you informed about further developments. Should you have any question, please contact a member of our Transparency Team or your trusted Loyens & Loeff adviser.