Bloomberg Tax
Free Newsletter Sign Up
Bloomberg Tax
Free Newsletter Sign Up

DAC7—Digital Platforms Playing a Key Role in Exchange of Information

May 28, 2021, 7:01 AM

Digital platform operators will be playing a key role in the international fight against tax evasion, pursuant to the seventh Directive on Administrative Cooperation between EU Member States in the field of taxation adopted by the EU Council on March 22, 2021 (2021/514/EU) (DAC7). The platform operators will have to collect and report information about the sellers on their platforms to the competent tax authorities.

Setting the Scene

The long journey of the EU against tax evasion is continuing at fast pace with the approval of the Directive known as “DAC7,” which combines the drive of the EU towards the need to achieve transparency and exchange information for tax purposes, with the power of the digital platform operators that are able to collect information in the context of their business activity. In practice, digital platform operators are being asked to support the tax authorities in the fight against tax evasion.

DAC7 amends Council Directive 2011/16/EU on administrative cooperation in the field of taxation.

So DAC7 has a double layer: on the one hand, the tax authorities’ need to transfer the burden to disclose information to the parties involved in a certain transaction, and on the other, the exchange of relevant information between the competent tax authorities. The latter aspect is still the subject of analysis and practical test with the recent implementation of “DAC6,” which introduced a similar disclosure obligation on intermediaries (such as consultants, lawyers, financial institutions) advising on or implementing an arrangement that could be potentially tax harmful.

Hence, bearing in mind the e-Commerce Directive (no. 2000/31/EC of June 8, 2000), which generally provided a prohibition for member states to ask for disclosure of information by the digital platform operators apart from in very specific circumstances, it is clear that DAC7 goes beyond upgrading the already existing rules on exchange of information, but will also considerably impact all stakeholders of the digital business industry, whether as sellers or the digital companies managing the platforms.

Digitalization is the real great challenge for taxation purposes, since the legislation is still anchored to old principles linked to the physical presence of the taxpayer or of the assets which are the object of the transactions. As a result, tax authorities at global level are trying to capture the revenues generated by the digital companies by imposing a digital services tax or new taxation rules.

However, due to the expansion of digital business and the popularity of sharing economy principles, it has been acknowledged that revenues generated by entrepreneurs selling goods or services through online digital platforms could also circumvent taxation because of the difficulty for local tax authorities in assessing the relevant taxpayers.

For these reasons, local tax authorities of some European countries have already tried to transfer the burden of communicating information regarding taxpayers to the competent tax authorities: one example is the legislation on short rentals that has been approved in several countries (e.g. Italy and Belgium). Tax authorities may indeed exchange the information obtained and use this as a source of data for possible subsequent audit activity.

The Organization for Economic Co-operation and Development (OECD) also published a report on July 3, 2020, “Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing and Gig Economy” addressing these issues.

However, it should be acknowledged that the transfer of such information constitutes a burden on online platform operators, imposing a load of administrative work that is not part of their core business and certainly diverges from the focus of their main activity. The business of online platforms is mainly focused on the development of technology to facilitate digital trade, the offering of a marketplace to provide efficient access to (cross-border) markets and the facilitating of the connection between suppliers of goods and services and users, etc.

Legal Basis for DAC7

DAC7 amends for the sixth time Council Directive 2011/16, which was introduced to render more efficient the exchange of information for tax purposes among member states to the widest extent possible, in order to assess tax violations. Council Directive 2011/16 has been amended over the years to take into account the evolution of business models; translating at EU level concepts already developed by the OECD with the BEPS Project, whose Action 12 of 2015 recommended states to adopt an international standard of compulsory data reporting, the so-called Mandatory Disclosure Rules, with the purpose of strengthening tax transparency and countering international abusive practices.

The latest amendments address the digital economy and need to be implemented by the member states by the end of 2022.

Taking a Closer Look

Online Platforms

The definition of “online platform” is broad and encompasses “any software, including a website or a part thereof and applications, including mobile applications, accessible by users and allowing Sellers to be connected to other users for purpose of carrying out a Relevant Activity, directly or indirectly, to such users.”

Platforms which solely allow processing of payments related to the “Relevant Activities” (see below), allow users to list/advertise a Relevant Activity or redirect/transfer users to a platform, are excluded from the reporting obligations (e.g. PayPal, Stripe, Facebook marketplace).

Platform Operators

The entities which are obliged to communicate the information to the tax authorities are those that contract with sellers to make available all or part of a digital platform. There are two types of platform operators, each with dedicated reporting rules:

  • EU reporting platform operators, which are either resident for tax purposes in a member state, incorporated under the laws of a member state, have their place of management in a member state, or have a permanent establishment in a member state;
  • non-EU reporting platform operators, which do not have any presence in a member state, but facilitate relevant activities of EU sellers or the rental of immovable property located in a member state.

Non-EU reporting platform operators may, however, be exempt from the reporting obligation insofar as “equivalent information” is already exchanged under an agreement between a non-EU country and an EU member state.

Relevant Activities

The Relevant Activities triggering a reporting obligation are:

  • the rental of immovable property, both residential and commercial, as well as any other immovable property, and parking spaces (e.g. Airbnb,;
  • personal services involving time- or task-based work whether performed alone or not, carried out independently or not, at the request of a user, and which were facilitated by a platform (e.g. Uber);
  • the sale of goods, i.e. any tangible property (e.g. eBay, Vinted); and
  • the rental of any mode of transport (e.g. Turo, Click&Boat).

In order to be reportable, the said activities will need to be carried out for a consideration in any form (net of any withholding by the digital platform operator) paid/credited to the seller and which the digital platform operator can verify.

Both cross-border and domestic reportable activities will be covered by the new obligation.

Reportable Sellers

The reporting obligation only relates to the individuals, companies and legal arrangements (i) that carry out a Relevant Activity and are EU residents; or (ii) that rent out immovable property in an EU member state through facilitation by the digital platform.

Sellers who have had less than 30 Relevant Activities facilitated by the digital platform for the sale of goods and for which the consideration received did not exceed 2,000 euros ($2,400) during the reporting period will also be excluded from the reporting (as may predominantly be the case for most sellers who use second-hand sale platforms such as Vinted). An exclusion further applies to listed entities, government bodies and sellers in the immovable property rental sector if certain thresholds are not exceeded.

Reportable Information

The information which should be reported includes the seller’s identity (name and address), the consideration received/credited, and tax/financial account identification details. In case of immovable property rental services, the address of the rented property must also be provided.

The required due diligence may well be outsourced to third-party service providers but will nonetheless remain the responsibility of the reporting platform operators.

The information must be reported by the end of January following the calendar year in which a reportable seller has been identified and for the first time by the end of January 2024 in respect of 2023.


Penalties, which will be determined by each EU member state independently but in such a way to be “effective, proportionate and dissuasive,” will be applicable, whilst other measures will be implemented to ensure compliance, for example, should a reporting platform operator fail to register itself.

Reporting platform operators will need to close the user account of any reportable sellers who have received a reminder twice to provide the relevant information and failed to do so. Such closure should occur if 60 days have passed since the last reminder without a response from the seller, and re-registration should be blocked for as long as the seller has not disclosed the requested information.

Practical Observations

DAC7 conclusively represents an important milestone that overcomes some of the restrictions in the current version of Directive 2011/16/EU on administrative cooperation in the field of taxation, since it will require the utmost attention on the part of platform operators and enterprises running Relevant Activities.

Platform operators must prepare themselves to collect and manage a significant amount of data regarding the enterprises using their platforms, including sensitive data such as the bank account on which the payment is received and any additional information of a financial nature; the total consideration paid or credited during each quarter of the reporting period; any fees, commissions or taxes withheld or charged by the platform; in the case of rental of real property, if available, the cadastral data and number of days each property was rented during the reporting period.

On the other side, taxable subjects which are using the platform operators to run their business activities must acknowledge that their information will be transferred to the tax authorities of all member states. They should therefore be very attentive to their own compliance activities, as it is not unlikely that the tax authorities of the member states will send questionnaires and perform cross-audits to verify the correctness of the data provided and identify potential tax evasion.

Another practical observation is the need to consider issues relating to the General Data Protection Regulation (GDPR) , due to the level of information requested. Even though DAC7 requests member states to respect the protection of the data collected in line with the relevant EU legislation, a careful review of the implementation rules will be a must.

The approval of DAC7 is, therefore, the starting point of a new important journey which will need to be followed closely in each EU country, in order to be prepared for the deadline provided by the Directive.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Giuliana Polacco is Senior Counsel and Annarita De Carne is Senior Associate with Bird & Bird Italy; Brent Springael is a Partner and Kevin Paramore is an Associate with Bird & Bird Belgium.

The authors may be contacted at:;;;