EU Directive on Administrative Cooperation (DAC7) for Digital Platforms

The EU has introduced Directive (EU) 2021/514 (DAC7) to ensure greater tax transparency in the digital economy in the EU. The implementation of this Directive in the Netherlands means that as of 1 January 2023, platform operators will be required to provide information on sellers making use of these platforms, such as their income, to the tax authority.

What is DAC7?

DAC7 is a new addition to the existing Council Directive 2011/16/EU dealing with administrative cooperation in the field of taxation. The new European Directive DAC7 is implemented in the Netherlands with the Act Implementing the EU Data Exchange Directive Digital Platform Economy.

This bill introduces the requirement for reporting platform operators to collect, verify and report data and information on reportable sellers conducting relevant activities through their digital platforms.

Exchanging information

With the digitalisation of the economy and the rise of digital platforms carrying out cross-border activities, tax authorities have less visibility on activities carried out through digital platforms. As a result, there is a risk that sellers may not (fully) declare their income via digital platforms in their tax returns. This also distorts competition with traditional companies.

To eliminate that risk, a uniform reporting requirement for platform operators has been developed (DAC7). Tax authorities of EU Member States automatically exchange information from the reports. This gives them access to information on income earned by sellers and allows them to assess taxes due.

Annual reports

Under DAC7, certain platform operators are required from 1 January 2023 to collect and annually report information on certain sellers on their digital platforms to the tax authority of an EU Member State.

Subsequently, the EU Member State to which the information is reported is required to automatically exchange this information with the tax authority of the EU Member State in which the reportable seller is a resident and, if the seller rents out immovable property, with the competent authority of the EU Member State in which the immovable property is located.

Platform operators must also inform their sellers which data they pass on to the tax authorities.

Other amendments of Directive 2011/16/EU

In addition to the provisions of Directive (EU) 2021/514 concerning the extension of the automatic exchange of information on income obtained through the platform economy, this directive introduces a number of other amendments to Directive 2011/16/EU, for example with regard to the legal protection of taxpayers in joint investigations, joint audits and data protection.