Navigating DAC7 Compliance in the EU

Supplied

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February 26, 2024

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The EU's adoption of the 7th Directive on Administrative Cooperation (DAC7) has introduced new reporting requirements for digital platforms operating in the region.

With the directive targeting the sharing economy and aiming to address tax evasion, companies must now adapt to these regulations to maintain compliance.

This blog post will explore the main challenges companies face in complying with DAC7 and offer suggestions on how to overcome them.

Over 2023, Platform Operators only needed to report on newly onboarded sellers on the platform.

Over 2024, the collection and verification burden will increase significantly as the directive extends to all New AND Existing sellers that need to be reported annually to local tax authorities.

You can find a list of local requirements and timelines here

Understanding the scope of DAC7

One of the first challenges companies face is understanding the full scope of DAC7, which requires digital platforms to report information about their users and transactions to tax authorities. This includes platforms facilitating the sale of goods, rental of property, or the provision of services. Companies need to assess whether their activities fall within the scope of the directive and identify which aspects of their operations require reporting.

Identifying relevant users and transactions

DAC7 necessitates the collection of information on both EU and non-EU users engaging in reportable transactions.

This means companies must develop processes to identify relevant users, track their activities, and maintain accurate records for reporting purposes.

This can be particularly challenging for platforms with a large user base or those operating in multiple jurisdictions.

Implementing robust data collection and verification procedures

To comply with DAC7, companies must collect and verify user data, including personal and tax identification information.

This requires the implementation of robust data collection and verification procedures, as well as ensuring compliance with data protection regulations such as GDPR. Companies must strike a balance between meeting DAC7 requirements and protecting user privacy.

Managing cross-border reporting requirements

DAC7 introduces a standardized reporting format for EU Member States, but local variations may still exist.

Companies need to familiarize themselves with the specific reporting requirements in each jurisdiction they operate in and ensure their reporting processes can accommodate these differences.

Staying up to date with regulatory changes

As with any new regulation, there may be updates or clarifications to DAC7 over time. Companies must stay up to date with these changes to ensure ongoing compliance. At Supplied, we have are continuing to monitor and update our customers on progress here

Conclusion

Complying with DAC7 presents several challenges for companies operating digital platforms in the EU.

By understanding the scope of the directive, identifying relevant users and transactions, implementing robust data collection procedures, managing cross-border reporting requirements, and staying up to date with regulatory changes, companies can navigate these challenges and maintain compliance.

Proactive planning and investing in compliance solutions can help organizations minimize risks and avoid potential fines or penalties associated with non-compliance

Supplied.eu has developed the first fully automated product solution for companies to comply with DAC7 requirements in the EU.

Contact us or email: support@supplied.eu on how to integrate our DAC7 verification solution for your needs

For a useful reference point - also check out the overview we've prepared regarding DAC7 requirements for each country in the EU here

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