Revenue from online sales in the EU grew 11 per cent in 2022, reaching nearly 800 billion euros. Online marketplaces like Amazon, eBay and Etsy are responsible for much of this upward trend.
In response, the European Council has enacted a new EU directive. The aim is to identify sellers that should pay VAT and income tax on online sales. The Directive (EU) 2021/514, or DAC-7, on “administrative cooperation in taxation”, came into effect on 1 January 2023.
It states that providers of online marketplaces (digital platform providers) must now report information about certain sellers to local tax authorities. This article explains how to comply with the DAC-7 directive using Brite Data Solutions.
What Does DAC-7 Cover?
“The digitalisation of the economy has been growing rapidly over recent years,” reads the directive. “This has given rise to an increasing number of complex situations linked to tax fraud, tax evasion and tax avoidance. The cross-border dimension of services offered through platform operators has created a complex environment where it can be challenging to enforce tax rules and ensure tax compliance.” As such, it is now the responsibility of digital platform providers to report revenues generated using them.
What Must be Reported?
The OECD has developed a set of rules to help with the reporting of online sellers. Reportable activities include apartment rentals, online sales of goods, personal services and transport rentals.
Under DAC-7, digital platform providers shall collect and report personal information every quarter. This information includes names, addresses, dates of birth, tax information numbers (TIN), VAT numbers, business registration numbers, financial accounts, the total consideration paid, fees, commissions or taxes charged by the platform.
Digital platform providers need access to extensive customer data to comply with DAC-7. Specifically, they need to understand how to identify the sellers that are targeted by the directive. They also need to prepare process like Customer Due Diligence (CDD) and Know Your Customer (KYC).
Using Brite to Comply With DAC-7
Digital platform providers can rely on Brite Data Solutions to report all the required data. Built on open banking APIs, Brite Data Solutions offers several advantages.
* Simplified account-holder verification ahead of a payout via approved KYC processes.
* An easy way to collect payment history. Merchants can review 180 days of payment history to identify sales and report this activity to the tax authorities.
* Less manual input. Brite Data Solutions automatically collects IBAN numbers, thereby lowering the risk of errors.
Take the pressure off internal resources with Brite Payments. Let’s talk if you want to discuss the advantages of using Brite Data Solutions for your business or learn more about DAC-7.