The continuous and dynamic development of the e-commerce sector is one of the reasons why tax authorities are expected to gain new competencies and access to such data that will allow them to effectively deal with the challenges of combating the tax shadow economy. It is for these reasons that as early as January 1, 2023, a large number of entities conducting their business online will be required to meet the new requirements under EU regulations.
On the first day of this year, EU Directive 2021/514 of March 22, 2021, also known as the DAC-7 Directive, came into force, with the basic idea being to further expand the principles of tax transparency.
According to the government’s announcements, the relevant regulations implementing the assumptions of the aforementioned Directive into the Polish legal order were supposed to appear by the end of last year at the latest. However, this did not happen, and currently the European Commission has called on Poland to remove the deficiencies related to the implementation of the Directive’s provisions.
A similar situation also exists for several other member states, such as Italy, Belgium and Spain. These countries currently have 2 months to provide the relevant explanations, as well as to complete the transposition of the regulations. It can therefore be expected that the relevant law will soon appear on the President’s desk.
What does the Directive refer to?
Directive 2021/514 relates directly to the EU Directive on Administrative Cooperation in Taxation, and is at the same time another attempt to improve its provisions by – first and foremost – introducing new mechanisms to facilitate the work of the tax authorities of EU member states.
The main elements on which the DAC-7 Directive under discussion is based are the information obligations imposed on digital platform operators. The relevant reports, which will have to be submitted, are to include revenue, personal and commercial data on service providers conducting their activities online.
What is a digital platform?
At this point, it is worth considering how to understand what a digital platform is in the referenced context. According to DAC-7, it is such software, so, for example, a mobile application or a website, which gives sellers the opportunity to connect with other users of the platform in order to perform the corresponding commercial activity. At the same time, it should be remembered that the Directive applies only to platforms and their operators; however, it does not apply to a situation in which a given seller has, for example, its own online store and it is through this store that it conducts business.
Who will be affected by the Directive?
The entities that are covered by the Directive’s provisions are platforms engaged in: rental of real estate (for residential as well as commercial purposes), rental of means of transportation, personally provided services and sale of goods.
To put it simply, these include any service platforms with which most people have surely already been familiar: e.g. booking.com, pyszne.pl, sites designed for car rentals such as Uber, streaming platforms such as twitch, online platforms such as amazon, Vinted, Allegro, etc.
Interestingly, platforms engaged in other types of activities that do not fall within the scope listed above will also have to submit appropriate documentation proving to tax authorities that such platform is exempt from the reporting obligations required under the Directive.
The DAC-7 Directive will not only affect entities established in the EU or subject to tax obligations based on residency. The Directive’s scope of influence includes any entity with vendors within the European Union.
According to the wording of the legislation, certain types of services, which are, after all, extremely popular, such as major social media: Facebook, Whats Up, Instagram, are not considered digital platforms. This is because they are primarily used for sending messages, possibly presenting ads, commercials and offers, but excluding payments (at most: they process them).
Scope of data to be reported
The scope regarding the necessary data to be provided on vendors offering their services on digital platforms and subject to the reporting obligation under the DAC-7 is quite broad, including, among others, information such as the identity of the vendor, the country in which the vendor resides, financial account and tax identification identifiers, numbers identifying the entity such as KRS/REGON or VAT number, the address of properties rented as part of the business along with an indication of the rental period, and, importantly, annual fees, i.e. revenues from payments for services or goods the vendor has provided using the online platform.
In order to reduce the administrative burden on record-keeping tax authorities, as well as the unwarranted factual interest in hindering vendors’ activities, two types of service providers were excluded from the reporting obligation:
- Occasional sellers. We are talking about such sellers who, during the reporting period of 12 months, meet all of the following conditions: they did not show more than 30 transactions at the same time the sum of payments they received for the offered services/goods does not exceed 2,000 euros (about PLN 9,500).
- Hotel chains and travel agencies, as well as similar entities, engaged in the rental of real estate on a continuous basis and characterized by high frequency, assuming that they make more than 2,000 bookings in a calendar year.
Reporting for 2023.
Significantly, the first reports resulting from the obligations imposed by way of DAC-7 will have to be filed no later than January 31, 2024 as information in relation to 2023. Tax authorities collecting information flowing down from individual digital platforms will have the opportunity to share the information obtained with the relevant authorities of other member states. According to the announcements of the legislator, in Poland the competent Authority would be the Head of KAS.
It is necessary to remember that the collection of information required by the regulations must be carried out in accordance with the applicable RODO regime.
In summary, for the digital platforms that are to be affected by the reporting obligation, the cited changes mean that procedures will have to be adjusted accordingly. It will be necessary from now on to implement, for example, appropriate systems for receiving new customers, registering them and obtaining information on their activities. It may become necessary to revise existing regulations and conditions under which services are provided. Certainly, it will also not do without an appropriate information campaign, making operators aware of the need to adapt to the new regulations and the resulting obligations. Failure to submit information in the case of an operator, will result in severe sanctions. Anticipated penalties include an obligation to pay from PLN 500,000 to as much as PLN 5,000,000, or deletion from the VAT register.