Business models based on digital platforms are both popular and successful: accommodation, cars, electronics, clothing – almost all goods and services are marketed on digital platforms. However, due to unclear regulations, not all transactions are correctly taxed, and the tax authorities of the EU states thus miss out on high tax revenues.
Directive (EU) 2021/514 on administrative cooperation in taxation, known as “DAC 7”, introduces comprehensive reporting and documentation requirements for online marketplaces and other digital platforms.
On 24 August 2022, the Federal Government adopted the Federal Ministry of Finance’s draft of the “Implementation of Council Directive (EU) 2021/514 of 22 March 2021 amending Directive 2011/16/EU on administrative cooperation in the field of taxation and modernising the law on tax procedure”.
The government’s draft bill on the implementation of the DAC-7 establishes far-reaching reporting obligations for digital platform operators, which go far beyond the recording obligations already existing for operators of electronic interfaces, according to § 22f UStG. The scope of application of DAC-7 does not only include online marketplaces as in § 22f UStG, which support the delivery of goods, but also platforms through which suppliers, for example, can sell goods, can provide rental revenues or personal services.
„The government draft stipulates plausibility checks of the reported data by the platform operators (§17 of the government draft). Insofar as there is an assumption that the information is incorrect, the platform operator becomes the “external auditor of the tax office”, as the platform operator must then, at the request of the Federal Central Tax Office, request the provider to correct the information or confirm it with supporting documents.“
At the same time, implementing the DAC-7 Directive will also result in changes to the Fiscal Code. In this context, external audits are to be accelerated in the future by limiting the suspension of expiry (section 171 (4) AO new), i.e. they are to be started and completed earlier.
The DAC-7 Directive provides authorities with tools to identify and monitor
The legal adjustments are intended to strengthen cooperation between authorities, i.e. administrative assistance, and to increase the efficiency of investigations to ensure the lawful taxation of cross-border situations and effectively combat tax evasion, tax avoidance and tax fraud.
In accordance with the “Act on the Reporting Obligation and Automatic Exchange of Information of Reporting Platform Operators in Tax Matters” (Platform Reporting Obligation and Exchange of Information Act – PMAustG), operators of digital platforms are obliged to report specific information to the Federal Central Tax Office (BZSt) annually – always by 31 January of the respective following year. The data is reported electronically and automatically to the BZSt.
Which platform users are affected?
This data should make it possible to identify providers (users) active on platforms and to be able to evaluate the transactions carried out by them for tax purposes. Reportable providers are persons and companies that are residents or liable to pay tax in Germany and those subject to taxation in other member states. Furthermore, they are affected if registered on a platform at any time during the reporting period and offer a relevant activity.
Provider information to be reported by the platforms:
- the first and last name;
- the address;
- Tax identification numbers, if available
- Financial account identifier
- EU Member State where the provider is deemed to be established or where the property is located
- any fees, commissions, or taxes withheld or charged by the platform operator in each quarter of the reporting period;
and numerous other data points.
In addition, the platform operators will be subject to increased due diligence obligations: for example, the verification of the residency of the provider and the plausibility of certain reportable information.
EU tax authorities gain access to data
Due to the Mutual Assistance Directive, all EU Member States should have access to the information relevant to them. Therefore, all data ascertained to the BZSt on domestic providers are forwarded to the tax authorities of the countries.
Additional reporting of the transaction totals of the providers by platform operators
In the future, operators of digital platforms will have to disclose information about transactions of their registered merchants to the European tax authorities. In addition to the number of transactions, this concerns, in particular, the income the traders earned from the platform’s commercial use, even if the service or goods were settled via the platform or otherwise.
Which platform operators are affected?
The tax authorities are focusing on a specific segment of digital platform operators: systems that enable their users or traders to communicate with each other via software and conclude legally valid transactions.
The platforms must offer the following services, among others:
- the provision of relevant activities by providers to other users; or
- the collection and payment of remuneration related to a relevant activity.
- the processing of payments in connection with a relevant activity;
- the listing of a relevant activity or the promotion of a relevant activity by users; or
- the redirection or forwarding of users to a platform.
As well as, among other things, that …
- the company’s registered office or management is in Germany or
- the company is registered under German law
- or a permanent establishment exists in the home country
Not only pure online marketplaces are covered by the DAC-7 Directive, but also platforms through which suppliers can provide rental transactions or personal services:
- Rental of immovable property,
- personal services,
- Sale of goods or
- Renting any means of transport.
The obligations of the PMAustG only affect “reporting platform operators”: the platform operators have a specific nexus to the home country or another EU Member State.
Fines and other sanctions for breaches of duty
In case of late or incomplete reporting, an administrative offence may be reported, and a fine of up to EUR 50,000 may be imposed.
In the case of violations of
- the registration duties,
- the reporting duty and correction reporting duty,
- the duty of information of the sellers,
- the obligations to cooperate vis-à-vis the sellers or
- the recording obligations
fines may be levied.
Both intentional and reckless commission are covered by the provisions on fines.
Conclusion
The implementation of the DAC-7 Directive in Germany has far-reaching consequences for platform operators: The information to be transmitted goes far beyond that which already applies to operators of electronic interfaces under § 22f UStG. It, therefore, makes sense to adapt the existing systems and deal with the possible new specifications.
But this may also have consequences for the providers: The transactions and the income of the providers using the platforms will now be more transparent for the BZSt and, in the administrative assistance procedure, also for the tax authorities of the other EU member states due to the mandatory reports of the platforms.
