As part of the Fair and Simple Taxation Package, the update of the Directive on Administrative Cooperation (DAC7) has finally come to an end with the adoption of the new rules by the Council of the European Union. Following the Parliament’s position adopted in the plenary setting of 10 March, the Council of the EU has now extended the EU tax transparency rules to digital platforms. As proposed by the Commission, platforms will have to collect and verify the seller’s name, address, TIN and VAT numbers, as well as business registration number and permanent establishment in the EU in the case of business sellers. The aim of these new obligations is to help Member States recover tax losses and prevent unfair trading practices from non-EU- based players.
By detailing due diligence and reporting rules for platform operators, the update of DAC7 will allow national tax authorities to detect income earned through digital platforms and determine the relevant tax obligations. Compliance will also become easier for operators of digital platforms as reporting will only take place in one Member State in accordance with a common EU framework. Additionally, the exchange of information and cooperation between national tax authorities will be improved, and it will become easier to obtain information on groups of taxpayers. The new rules also provide a framework for the competent authorities of two or more Member States to conduct joint audits, including carrying out simultaneous controls and allowing officials to be present in another EU Country during an enquiry.
In terms of implementation, Member States shall require platforms to keep records of the steps undertaken and any information relied upon for the performance of the due diligence procedures and reporting requirements. Platforms could rely on a third-party service provider to fulfil the due diligence obligations and follow the requirements for time and manner of reporting, stated in the Annex. The aim is to reduce the administrative burden placed on platforms, to compensate the introduction of the new reporting obligations.
The update of DAC7 is an important update of the EU rules, which is supposed to help national authorities identify situations where tax should be paid. The new rules cover digital platforms located both inside and outside the EU and will apply from 1 January 2023 onwards. The updated Council Directive (EU) 2021/514 will enter into force twenty days after its publication on the Official Journal of the EU.