The EU has approved DAC 7 rules on digital platform reporting. Under the DAC7 rules, digital platforms must report income earned by sellers through the platform.
The new rules are an extension of the Directive on Administrative Cooperation (DAC).
Online platforms are now obliged to collect sales information from sellers and report this information to the relevant member state. In addition, the onus falls on the platform to verify the sales information.
Moreover, in terms of DAC7, all EU states automatically share the information provided by the online platforms.
Making the digital economy more transparent
European Commissioner for the Economy Paolo Gentiloni welcomed the regulations. Gentiloni said authorities need to updated tax rules to meet the importance of digital platforms in the modern economy.
Prior to the adoption of DAC7, Gentiloni said that updated regulations would be a boost for transparency: “National authorities will automatically exchange information on the revenues generated by sellers on these platforms, and those sellers will benefit from simpler administrative procedures. This is good news for the public purse and good news for honest entrepreneurs.”
DAC7 covers both digital platforms based in the EU and non-resident digital platforms that sell to EU customers.
OMP’s duty to manage VAT
Online marketplaces’ responsibility for VAT will extend beyond reporting. In terms of the EU e-commerce package, due to take effect in July 2021, online marketplaces will in many cases be required to collect, remit and report VAT themselves.
Similarly, regulations recently introduced in the UK make OMPs liable for collecting and reporting VAT in many cases.
New technology for a new economy
Tax authorities are developing new regulations in response to the rapid growth of e-commerce and digital services. Digital businesses thus need powerful and flexible VAT compliance technology to manage the additional administrative demands and remain fully compliant.
Disclaimer: Reproduced/Adapted with permission from VATGlobal.
