DAC7, otherwise known as the New Digital Platform Reporting Rules, affects digital platforms around the world. For operators of such platforms, it’s imperative to understand what these new regulations constitute as a ‘platform’, why they’re being updated, and what the associated penalties might be.
What is a platform?
A platform refers to any software, including a website or part of it, as well as applications (including mobile apps), that is accessible by users. It facilitates connections between sellers and users to conduct relevant activities, either directly or indirectly. This definition also encompasses arrangements for collecting and paying consideration related to any relevant activity.
However, the term "platform" excludes software that exclusively allows any of the following:
- Processing payments related to a relevant activity.
- Listing or advertising a relevant activity.
- Redirecting or transferring users to another platform.
The growth of digital platforms, such as online marketplaces and e-commerce websites, has opened new avenues for individuals and businesses to earn income. Small business owners and entrepreneurs can now scale their operations online and reach a broader customer base through various websites and marketplaces.
The latest regulations aim to address challenges arising from the evolving landscape of digital commerce. These regulations seek to ensure that all income generated through digital platforms is accurately reported and taxed.
The measures will impact digital platforms that facilitate services or goods sales by taxpayers. This includes online marketplaces like Vinted and Etsy, food delivery services such as Deliveroo and Just Eat, as well as taxi services like Bolt or Uber.
Accommodation services like Airbnb and Vrbo are also affected, along with small businesses utilizing large online marketplaces.
Reporting rules focus on platforms that enable specific activities, termed relevant activities. A relevant activity encompasses the provision of relevant services or the sale of goods. Relevant services include:
- Personal Services: Time or task-based work performed at a user's request, including:
- Immovable Property Rental: Covers residential and commercial properties, including fixed assets like parking spaces.
- Rental of a Means of Transport: Encompasses vehicles and equipment designed for transporting goods or people.
- Sale of Goods: Defined as any tangible property; intangible items such as rights or vouchers do not fall under this definition unless they entitle the holder to redeem a relevant activity.
For companies incorporated or operating within the UK, if you do not follow the rules, you may be charged 3 types of penalty:
- A penalty of up to £1,000 for not telling HMRC if you’re a reporting platform operator or excluded platform operator.
-an initial penalty of up to £5,000 and a continuing penalty of up to £600 per day for not reporting by the 31 January reporting deadline.
- a penalty of up to £100 for each inaccurate, incomplete, or unverified seller’s record.
If sellers do not cooperate, you may want to consider actions such as:
- limiting their access until you collect the information
- stopping them from registering on your platform
It’s crucial for platform operators to understand these regulations and ensure compliance to avoid such penalties. This includes timely registration, accurate data collection, and thorough due diligence procedures.
For more detailed information, you can refer to the Dutch Tax Authorities’ official page on DAC7:
Note: Always consult with a tax professional or legal advisor to understand the full implications of DAC7 on your specific operations.
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