Reporting obligations in the platform economy
Reporting obligations in the platform economy
It is impossible to imagine today's economy without platforms. They allow entrepreneurs to sell goods or services and have been a catalyst for the sharing economy. At the same time, globalization and digitalization have made it more difficult for tax authorities to get a grip on individuals and entrepreneurs that trade via these platforms. The EU Member States recently adopted the proposal to amend the Directive on Administrative Cooperation (DAC). Part of these adjustments, the latter of which are referred to as DAC 7, entails an obligation for platforms to collect certain information from users offering goods or services on the platform and to report this information to the tax authorities without prior request from the latter. These obligations will apply as from 1 January 2023. However, certain platforms will already be required to collect information and provide it upon request of the tax authorities at an earlier stage. As from 1 July 2021, the new VAT rules for e-commerce will already impose administration and information obligations on platforms.
1. DAC 7 – administration and information obligations concerning the sharing economy
Under the adopted new EU DAC 7 rules, platforms will need to report certain information about persons and businesses offering goods or services for sale via the platform and perform due diligence procedures on them. The information will be provided by the platforms to the tax authorities of the EU Member States and subsequently recorded in a central EU register, which can be accessed by the tax authorities from all EU Member States. The platform will need to obtain the information from the persons and businesses operating on the platform.
For the purposes of these rules, a platform is defined as any software, accessible by users and allowing sellers to be connected to other users for the purpose of carrying out certain activities (see below). It also includes any arrangement for the collection and payment of a consideration in respect of those activities. The activities for which the reporting obligation apply are: renting of immovable property, personal services, sale of goods and the rental of means of transport. Payment service providers, entrepreneurs that only provide services regarding listing or advertising of activities and platforms only redirecting or transferring customers to other electronic interfaces are excluded from the obligation.
The first DAC 7 reporting period starts at 1 January 2023. The due diligence procedures must be completed ultimately 31 December of each year. The information will need to be reported ultimately 31 January of the next year.
Information that the platforms need to record includes service fees paid to the platform by the person offering goods or services for sale on the platform. This may in the future allow for prefilled tax returns for the persons offering those goods or services for sale on the platform. If a seller does not provide the information that the platform requested, the platform will need to take action after two reminders, but not before 60 days have expired. This action includes closing the account of the seller, preventing the seller to register on the platform or stop payments to the seller up until the seller has provided the requested information.
2. Administration obligations under new VAT rules for e-commerce
Under the new VAT rules for e-commerce a platform may be the person responsible for the remittance of VAT on B2C e-commerce transactions, which transactions are commercially/legally carried out by the supplier. We refer to our earlier article on this matter. Where a platform facilitates transactions with EU consumers it will need to record certain information. This information must be provided to the tax authorities upon their request.
This obligation applies to electronic interfaces that facilitate supplies of goods or services to a non-taxable person within the EU. It is not required that the person trading via the platform is a taxable person. In our view, transactions between consumers, typically taking place in the sharing economy will be covered by this obligation too. An electronic interface is deemed to facilitate where it allows a customer and a supplier offering goods or services for sale through the electronic interface to enter into contact, which contact results in a supply of goods or services through that electronic interface. Payment service providers, entrepreneurs that only provide services regarding listing or advertising of goods or services and platforms only redirecting or transferring customers to other electronic interfaces are excluded from the obligation. Electronic interfaces are also excluded if they (i) do not set any of the terms and conditions under which the supply is made, (ii) are not involved in the payment and (iii) are not involved in the ordering or delivery of the goods.
Records must be kept for a period of 10 years, which period starts as from the end of the year during which the transaction was carried out. At the request of the tax authorities the information must be transmitted to those authorities.
What can you do?
It is important that, if you are a platform operator, to find out what your obligations will be as from 1 July 2021 and from 1 January 2023 onwards. If you prepare yourself in time, you will prevent the situation where you are not able to meet these obligations. More specifically, you will prevent the related consequences of not meeting the obligations. If you are subject to both obligations, it is worth considering setting up a procedure now that can easily be extended in 2023 to meet the obligations under DAC 7 from then on as well.
Want to know more?
Of course, we are happy to assist you in determining the consequences and come up with (practical) solutions for your situation. Please contact one of our advisers.