DAC7 New Reporting Obligations 2023
With the introduction of DAC7, online retailers trading on marketplaces such as Amazon may fall within the scope of the new reporting obligations of digital platforms. Under the new initiative, online marketplaces will need to start reporting seller’s revenue and business information to tax authorities on an annual basis when facilitating supplies to EU consumers.
When does DAC7 take effect?
With DAC7 taking effect, marketplaces must submit a report for transaction data in 2023 by 31st January 2024.
Who is affected by DAC7?
DAC7 targets reportable sellers, which includes any EU resident individual or company using an online platform to carry out reportable activity in the EU with sales exceeding EUR2000 or over 30 transactions in one year, as well as non-EU individuals and businesses renting out property located in the EU.
Why does DAC7 matter?
While DAC7 does not create new tax obligations for online marketplace sellers, those within the scope of the new reporting obligations should be complying with their existing liabilities. The DAC7 initiative implies an increase of information sharing between EU member states and therefor more scrutiny and potential for audits. One of the goals of the new initiative is to create transparency which will help authorities to assess and compare income tax and VAT. The initiative will also allow EU member states to open joint audits on cross-border sales.
The new initiative illustrates the increasing role of digital platforms in tackling tax compliance and fraud in the EU.
Does DAC7 change how marketplaces collect VAT?
No, DAC7 introduces obligations separate from the VAT collection by marketplaces. It does not change your VAT liability or that of the marketplace on which you sell. It is an additional obligation for marketplaces.
With DAC7, what happens if I don’t submit the right information to marketplaces?
Your account may be suspended or deactivated and your fund withheld.
What do we do if marketplaces haven’t reached out to us?
We suggest reaching out to them and to ensure you are complying with your VAT obligations when trading in the EU.
Has DAC7 set a deadline for Amazon sellers to update their trader information?
Amazon is giving reportable sellers until 1st October 2023 to make sure they have provided on their Seller Central account the information required for each Amazon store they use. Once a seller becomes reportable, they are given 60 days to send the required details. Failure to do so may result in the marketplace deactivating the relevant accounts and withholding funds until the seller complies with the requirements.
Does the DAC7 initiative concern sellers in the UK using marketplaces such as eBay and Etsy? Will we have to comply with this as we do sell to EU countries through these platforms?
DAC7 affects EU sellers selling into the EU any type of goods. Non-EU sellers (i.e. UK sellers) can also be affected if they supply rental accommodation. However, please note that the UK is looking to introduce similar requirements in the next year.
Is the UK going to introduce something similar to DAC7?
Yes, the UK is planning to introduce similar regulations based on the OECD model’s reporting rules for digital platforms. A consultation on the UK draft regulations was made in autumn 2022. If approved, the new regulations will enter force in January 2024.
I’m using a crowdfunding platform, do I need to worry about DAC7?
Crowdlending platforms, payment services providers are outside the scope of the obligations, however, crowdfunding may be and therefore, we also suggest that you are on top of your tax obligations when choosing to use one of these platforms.
The scope of these new obligations does not cover crowlending platforms or payment service providers. However, these new obligations may affect crowdfunding platforms. Therefore we suggest you are aware of your tax obligations when using one of these platforms.