20 of April 2023
Legal Framework
On April 13th, 2023, the European Commission adopted a new implementing regulation for certain provisions of the Amending Directive to the 2011 Directive on Administrative Cooperation (DAC7).
The regulation aims to ensure that the national law of a non-EU jurisdiction and an agreement between the competent authorities of a Member State and a non-EU jurisdiction guarantee the equivalence of information that is to be automatically received by the Member State, related to activities within the scope of the DAC and required under DAC’s reporting rules.
The regulation outlines specific criteria for assessing and determining the equivalence of information, such as Reporting Platform Operator, Reportable Sellers, and Relevant Activity, as well as, due diligence procedures, reporting requirements, rules and administrative procedures, which will be assessed by the European Commission. If the criteria are met, the information to be automatically exchanged is considered to be equivalent.
What is DAC7 and who does it apply to?
DAC7 stands for Directive 2021/514 on administrative cooperation in the field of taxation, which imposes additional reporting obligations between digital platform operators and tax authorities. DAC7 applies to operators/entities that provide digital platforms allowing their users to:
- Sell goods (e.g.,Amazon, AliExpress, eBay)
- Rent properties (e.g.,AirBnb, Booking)
- Provide personal services (e.g.,Uber, UberEats)
- Hire transport services (e.g.,Miles, ShareNow)
Practical implications
Under DAC7, operators must validate and share with the relevant tax authorities the registered seller’s data operating through their digital platforms, namely:
- Name
- Identification number
- Bank account details
- Taxes applied in transactions
- Annual revenue generated by the seller through the digital platform
It should be noted that this directive has an extraterritorial scope, since it applies to operators who are resident for tax purposes in a Member State, but also to operators without any residence connection with the EU and who facilitate the performance of a relevant activity by sellers subject to communication.
Implementation
The implementing regulation will enter into force 20 days after its publication in the Official Journal of the European Union. This regulation could potentially impact taxpayers who conduct business in non-EU jurisdictions and have reporting obligations under the DAC rules. Taxpayers should review their reporting obligations and ensure compliance with the new regulation.
In Portugal, the effective implementation of DAC7 is imminent. The proposed Law that aims to transpose the aforementioned Directive into our legal system will:
- Amend and republish Decree-Law No. 61/2013 – diploma that transposed Directive 2011/16/EU on administrative cooperation in the field of taxation (DAC) into national law;
- Introduce adjustments to the Complementary Regime of the Tax and Customs Inspection Procedure;
- Define a sanctioning framework in case of non-compliance with communication rules and due diligence, or omissions and inaccuracies.
Next steps
We remind you that the first DAC7 reports must be submitted at a company level (digital platform operators) by 31 January 2024. Therefore, given the extensive work required to comply with the legal obligations set out by DAC7, we recommend:
- Performing an impact assessment to determine if your business falls within the scope of DAC7.
- If so, designing and implementing relevant internal controls and procedures to collect, prepare and report the required information to the tax authorities.
We are, of course, at your disposal should you require specialized assistance in this area.
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The information above is not intended to be an exhaustive analysis of all the changes to the current legal regime, but a selection of those that we believe to be the most relevant, and do not dispense with consulting our Company and/or the diplomas to which they refer.
For more information contact: Catarina Breia (+351 91 7575 832 or cbreia@pt-nexia.com) from our Tax Department.
