DAC-7 – the EU Directive on Administrative Co-operation – took effect on 1st January 2023 and the deadline for UK platforms to report sales data to the EU is January 2024!
Governments across the EU have been watching the rise of online marketplace platforms with interest. These dynamic digital trading posts have taken on a substantial and growing portion of economic activity, and the various exchequers have decided they need to work together to ensure that none of it goes untaxed.
To this end, they’ve introduced detailed new regulations to guarantee cross-border transparency – in short, DAC-7.
DAC-7 legislation aims to ensure that data is collected, reported and automatically shared between EU member states on users of all ‘relevant’ services offered within the EU on digital platforms (including websites and mobile apps). This includes platforms based outside the EU, if their services are sold in member countries.
It’s both wide-ranging and systematic.
Given that the penalties for non-compliance are severe, you should already be taking care that you don’t fall foul of DAC-7.
It’s not what you’re thinking…
Now, these new EU reporting requirements are not to be confused with the existing UK reporting requirements for digital platforms – whose deadline is January 2025 – this is a further layer of data collection, requiring similar information but over a wider catchment area and due a whole 12 months earlier.
And it’s different again to the more detailed EU data submission requirements under VAT in the Digital Age (VIDA) – which was recently postponed for a year to give all those concerned more time to prepare properly.
What exactly is DAC7 all about? Well, please read on.
Should you be reporting under DAC7?
Yes, you need to collect information on your ‘sellers’ if you’re a digital platform operator with a platform and/or mobile app that allows them to:
- Rent immovable property (including, but not limited to, residential and commercial property), and parking spaces located within the EU
- Rent any mode of transport within the EU
- Provide personal services (involving “time or task-based” work) within the EU
- Sell goods within the EU
…and to be clear, this applies to all businesses who do any of the above – regardless of whether they’re based within the EU themselves. If you do need to report, you can choose any EU member state to register in and submit your annual returns to.
What must you report under DAC7?
If the above applies to you, you must collect and report all the following on each seller on your platform:
If they’re an individual:
- Name and primary address
- Date of birth
- All Tax identification Numbers (TIN) issued to that seller, including each Member State of issuance – or their place of birth, if they don’t have a TIN
- VAT registration number if the seller has one
- Value of their sales from the platform
- Value of commissions or fees paid to the platform
If they’re a business entity (e.g. a limited company):
- Legal name and primary address
- Details for each reportable seller of each Member State where relevant activities are carried on through a permanent establishment in any Member State, where available
- All Tax identification Numbers (TIN) issued to that seller, including each Member State of issuance
- VAT registration number if the seller has one
- Business registration number.
- Value of their sales from the platform
- Value of commissions or fees paid to the platform
How much of the above will be used is uncertain – but what is pretty certain is that it will be used if there were any question marks over someone’s tax or VAT declaration, or if this differed from the platform’s figures, or if they’ve failed to report tax at all.
It’s just one more window HMRC has on your world – allowing them to draw down further data to confirm the accuracy of your UK VAT reporting. And, of course, this will intertwine closely will HMRC’s own UK plans for Platforms, providing even more financial information to verify against recorded activities, should they come to call.
Which makes it all the more important that your VAT compliance processes are dovetailed and optimised. Because your time is better spent running your business than in time consuming VAT inspections or worse still, long running VAT disputes. And of course, your financial resources can be much better spent than on fines and penalties.
Do you have a clear idea of how compliant your VAT accounting processes truly are? Wouldn’t you rather stay a few steps ahead of the VATman’s clutches as their views on the collection and sharing of data unfold?
Well, you may find Xeinadin’s VAT Risk Evaluation Tool useful to give you more clarity. Better still, get in touch with Xeinadin’s Indirect Tax team to discuss any queries or grey areas.
Note: the above article is for information purposes only and specific advice should always be taken.
