More for UK Platforms - DAC-7 EU data return deadline approaches

DAC-7, the EU Directive on Administrative Co-operation, commenced operation in January last year and the first annual return is due at the end of this month, January 2024!

Again this in not directly a VAT related issue, it's about data collection and reporting that platform operators in the UK need to be alert to. We have already dealt with questions from our overseas clients in this regard, as the deadline for EU reporting is fast approaching.

These EU reporting requirements are in addition to the recent announcements from HMRC here in the UK as to their UK reporting requirements, where their deadline is January 2025. Please see our earlier note on the UK requirements here - there are similarities in the data required but it's the reporting deadlines that differ.

As usual, there are financial penalties for non-compliance. 

You may recall that at the end of last year agreement on the more detailed EU data submission requirements under ViDA was postponed.

The aim of the DAC-7 legislation is for the EU member states to automatically share information on the EU trade that is happening using digital platforms, including from websites and mobile apps. Digital trade has grown hugely and quickly, and this legislation is aimed at helping to ensure that tax is being properly collected from it across the EU.

The DAC-7 Directive encompasses non-EU platforms that offer relevant services in the EU; it is not just relevant to EU platforms.

We would hope that as a UK business you have already considered and planned any DAC-7 reporting obligations that you have but if you haven’t there is a small window for action remaining!

With few exceptions, you may be affected by the reporting requirements and need to submit DAC-7 returns if you are a platform that is involved in the following in the EU:

• Rental of immovable property including residential and commercial property, as well as any other immovable property and parking spaces
• A personal service ( involving “time or task-based” work)
• Sale of goods
• Rental of any mode of transport   

where that activity happens in the EU.

If you do need to report, as a non-EU business you may choose any EU member state to register with and submit your first annual return to.  

The information that needs to be collected by platforms on their “sellers” and then reported to the EU tax authorities is detailed below.

For individuals

• Name and primary address
• Date of birth.
• All Tax identification Numbers (TIN) issued to that seller, including each Member State of issuance
• In the absence of a TIN, the place of birth of the seller
• VAT registration number if the seller has one

• Value of their sales from the platform
• Value of commissions or fees paid to the platform

For business entities such as limited companies

• Legal name and primary address
• Details for each reportable seller of each Member State where relevant activities are carried on through a permanent establishment in any Member State, where available
• All Tax identification Numbers (TIN) issued to that seller, including each Member State of issuance

• VAT registration number if the seller has one

• Business registration number.

• Value of their sales from the platform
• Value of commissions or fees paid to the platform

Currently, we don’t know how much the shared information will be used, but certainly we should expect that it would be used if there was any uncertainty about someone’s declared tax or VAT or if they’ve omitted to report tax at all. Clearly, it would be important that the seller’s own declaration of tax/sales using a platform agreed with the reporting of the same by the platform under DAC-7.  

Pulling further VAT reporting information from business systems in this way is a reminder as to how HMRC will be able to draw down reporting data in order to validate the accuracy of your VAT reporting here in the UK. Which refers back to HMRC earlier announcement we commented on at the start of the year in respect of their own UK plans in this regard for Platforms. It adds to the importance of ensuring your VAT compliance processes are optimized. No one wishes to spend management time in discussion with HMRC or worst still, be exposed to the risk of VAT errors and penalties.

On a general risk management area the VAT Risk Evaluation Tool we have devised here at Xeinadin’s Indirect Tax team can be used by clients to validate how compliant their VAT accounting processes truly are to get ahead of the direction of travel that we are seeing from tax authorities in their collection and sharing of data.

Get in touch if you have any questions in this regard – Indirecttax@Xeinadin.com

This note is for information purposes only and specific advice should always be taken.