DAC7

Relevant activities are the types of work or income-generating actions that are made on a digital platform that must comply with DAC7 requirements. For example, the action can be a user renting out a house on a site or selling used items on a digital marketplace. 

Platforms that are covered by DAC7 include online service providers like:

• Car-sharing apps
• Freelance worker-oriented platforms
• Platforms like Airbnb and holiday rentals
• Online platforms for selling goods and services
• Other non-EU platforms (for example, UK businesses) that have users and operate within the EU countries 

The first deadline for filing was set to be January 31, 2024. This covers the 2023 calendar year. Tax authorities share data with other Member States by the end of February 2024. In general, Automatic Exchange of Information is a system where EU member states share tax data with each other about income made through digital platforms. This helps improve tax compliance across borders and stay compliant with DAC7. 

Platforms are required to collect and share key information about platform sellers, such as their:

• TIN 
• Full name and address
• Bank account details
• Business registration details (for companies)
• Date of birth (for individuals)
• Number of transactions
• Total income earned on the platform
• Any fees, commissions, or taxes deducted

Reportable sellers are individuals or businesses that earn money through a reporting platform. As a result, their information needs to be shared with tax authorities under DAC7.

Not following the DAC7 regulation can result in negative consequences affecting the user’s account on the platform. 

For example:

1. The account can be blocked or temporarily suspended (unless the user fills in the required information).
2. All transactions can be put on hold until the user complies with the requirements. 

In more extreme cases, the platform can be required to report the account to regulatory authorities as a non-compliant user. To avoid such trouble, it’s best to fill in the required details as soon as the information is sent to the user.  

A joint audit is the process that involves two or more EU countries teaming up to review a taxpayer’s situation together. It helps solve tax issues faster and ensures consistent findings between countries while staying compliant with the DAC7 regulations. 

Data retention is limited to a maximum of five years, and operators must apply strong security measures, including meeting the General Data Protection Regulation (GDPR). In practice, that means platform sellers must be informed about what data is collected, how it’s used, and how long it’s stored.

There are some effective measures that will help you comply with DAC7 requirements, for example:

• Updating your data collection requirements (for example, by adding mandatory new fields, such as TIN/VAT or IBAN verification). 
• Shaping your scope (by identifying which activities fall under DAC7, for example, rental platforms).
• Verifying current seller information (often by using Know Your Business (KYB) software solutions to recheck existing company details for corporate clients).
• Designating a dedicated compliance officer (who would be responsible for managing DAC7 and tax reporting tasks).
• Testing and keeping an audit-ready record trail (for example, by running periodic process reviews and tests before each reporting cycle).