DAC7: For more tax justice on trading platforms

Book your next vacation including hotel, rental car and matching outfits: Goods and services are always just a click away. They are sold on digital platforms. However, the EU member states are losing out on billions of euros in taxes every year because internet companies are not reporting their e-commerce turnover, the member states claim. Digital platforms are therefore to be held more accountable from January 2023. The EU hopes to improve tax transparency and generate additional tax revenue of 33 billion euros.

Optimize data exchange between online platforms and authorities

In order to close taxation gaps, platform operators with their registered office, place of management or permanent establishment within the EU are to report income from providers to the competent tax authorities. The EU member states are thus implementing the so-called DAC7 Directive. This is intended to ensure transparency regarding business activities on digital platforms and make it possible to assess transactions for tax purposes.

The term "digital platforms" is deliberately defined more broadly to cover software, websites or mobile applications that enable sellers to connect directly or indirectly with potential buyers and carry out so-called Relevant Activities. The EU and Germany focus primarily on e-commerce platforms. These include, in particular, the rental of real estate, "ridesharing", the provision of personal services and the sale of goods.

What exactly does this mean for my e-commerce company?

To put it in a nutshell: Exchange of information. This is because the directive obliges e-commerce companies to disclose extensive information on transactions, income and sellers on the respective platforms and to pass this on to the relevant tax authorities. A summary of this information must then be reported to the national tax authorities once a year in the form of an annual declaration in order to enable a tax assessment of the transactions.

Conclusion

With this directive, DAC7 brings an important innovation to the e-commerce sector. By the beginning of next year, e-commerce operators will have to deal with important questions: Does my e-commerce platform fall under the reporting obligation? How exactly does the national exchange of information and data collection by the competent tax authorities work? And do my own general terms and conditions also need to be adapted to the new EU regulation?

It is now up to the affected operators themselves to take the right steps to make their e-commerce business legally compliant within the framework of DAC7.