Home / Publications / Tax Connect Flash

Tax Connect Flash

DAC 7: online platforms, key players-to-be in the European tax transparency framework?

22 September 2020

On 15 July 2020, the European Commission adopted a new tax package to support economic recovery and long-term growth within the European Union (“EU”). Furthering EU tax policy, the package builds on the concepts of tax fairness, simplicity and transparency.  

This package relies on three components, one of which is a legislative proposal to amend Directive 2011/16/EU on administrative cooperation in the field of taxation, with a view to extending to digital platforms the existing rules on tax transparency 1 The proposed Directive also aims at strengthening the exchange of information between Member States by clarifying the notions of "foreseeable relevance" and "group requests", and by introducing the notion of "joint audits" within the scope of DAC. (proposal for a Directive COM(2020) 314 final (2020/0148 (CNS)) or "DAC 7"). 

The proposal imposes on platform operators an obligation to collect and verify information relating to persons selling through their intermediary, so as to report the information collected to the Member States, which will in turn be able to exchange it with the other Member States concerned. It is based on an impact assessment which underlines the characteristics of the digital platform economy that "make the traceability and detection of taxable events by tax authorities very difficult".

DAC 7 objective is two-fold: (i) introducing a mandatory automatic exchange of information between competent tax authorities to enable them to collect adequate tax revenues and (ii) harmonizing the legal framework for platform operators reporting obligations to avoid high compliance costs arising from disparate national legislations. To date, twelve Member States, including France, have already adopted domestic measures imposing reporting obligations to online platforms.

1. Scope of DAC 7 proposal

In the proposed Directive: 
  • Online platforms required to collect and report certain information are defined as any software, including websites and mobile applications, allowing sellers to be connected to users for the purpose of carrying out any of the following activities: sale of goods, provision of services, rental of immovable properties or modes of transport, investing and lending in the context of crowdfunding. Only platforms allowing sellers to be connected to users in order to carry out their activity are included in the scope, excluding those that exclusively allow (i) processing payments in relation to the relevant activities, (ii) users to advertise such activities, or (iii) redirecting or transferring users to a platform.
  • Reporting platform operators are entities that contract with sellers to make available all or part of a platform to such sellers. Reporting platform operators are in principle those having their tax residence in a Member State, or in the absence of such tax residence, those incorporated under the laws of a Member State or having their place of management or a permanent establishment in a Member State. Foreign operators which do not meet the above conditions but facilitate the carrying out of a relevant activity by a reportable seller or the rental of immovable property located in a Member State should be within the scope as well.
  • Reportable sellers, whether they are natural or legal persons, are those who are resident in a Member State or that rent out immovable property located in a Member State. In addition, a foreign selling entity shall also be considered as a resident in a Member State where it has a permanent establishment.

​2. New obligations imposed on platform operators

Based on DAC 7 proposal, reporting platform operators would first have to register in a unique Member State (in principle the one in which they have a VAT number).

They would be required to collect and to verify the identification of reportable sellers through due diligence procedures, and to report annually to the Member State in which they have registered, or to any other Member State in which they have a permanent establishment, the information required by DAC7.

In a first phase, the platform operators would have to identify the reportable sellers and to collect the following sellers’ information: first and last name or legal name, primary address, TIN (Tax Identification Number) and VAT identification number, if any, date of birth or business registration number and, as the case may be, the existence of a permanent establishment.

The platform operator would have to verify the information collected using all information and documents available in its records, as well as any electronic interface made available by a Member State or the EU free of charge. These due diligence procedures must in principle be completed by 31 December of the reportable period at the latest.

In a second phase, the platform operators would have to collect information on the transactions carried out by reportable sellers, which they must then report to the competent authority of a Member State. The information to be reported identifies the platform operator itself, the sellers concerned, the financial accounts to which the consideration is paid or credited, the total consideration paid or credited and any fees, commissions or taxes withheld or charged by the reporting platform during each quarter of the reportable period.

In case a seller provides immovable property rental services, additional information related to the location of the rented property and length of rent would have to be reported.

The information collected would then be transmitted by the reporting platform operator to the competent authority of the relevant Member State no later than 31 January of the year following the reportable period.

3. Automatic exchange of information between Member States

The information reported by platform operators to a given Member State would automatically be communicated by this Member State to the Member States of which reportable sellers are resident and/or rented immovable properties are located. The exchange is to take place within two months following the end of the reportable period.

Should this proposal be adopted, the Member States would have to transpose DAC 7 by 31 December 2021 at the latest. The measure would apply for the first time to the revenues generated by reportable sellers as from January 1st, 2022. The legal framework to be created by DAC 7, which proposal may still be amended, notably to take into account the model rules for reporting by platform operators published by the OECD on 3 July 2020, would complement the existing domestic legal frameworks.


Picture of Annabelle Bailleul Mirabaud
Annabelle Bailleul-Mirabaud
Picture of Céline Pasquier
Céline Pasquier
Senior Associate