Since 1 January 2023, operators of digital platforms in France have been subject to new reporting requirements. Council Directive (EU) 2021/514 of 22 March 2021 is the seventh revision of the Directive on Administrative Cooperation (DAC)—also known as “DAC7”. This directive created a regulatory framework for collecting and reporting specific tax information from platform users.

In this article, we explain DAC7, including what it governs and how to comply with the rules to avoid fines.

Key takeaways

• The seventh revision of the Directive on Administrative Cooperation (DAC7) is a European directive that governs digital platforms within the EU. It requires operators to report income from platform users on an annual basis.
  
• The purpose of DAC7 is to increase taxation transparency in the digital economy.
  
• DAC7 targets specific types of businesses, particularly ones that sell goods and services or rent property and transport.
  
• To comply with DAC7 requirements, platform operators must collect and verify user information, file annual reports, and notify users of information sent to authorities.
  
• Failure to file reports is punishable by a fine of up to €50,000.
  

What is DAC7?

DAC7 is a European directive that requires digital platform operators to report yearly revenue generated from sellers and service providers on their platforms to the tax office. This is the seventh version of the DAC in the area of taxation.

DAC7 establishes a unified European framework for collecting, verifying, and annually reporting data to tax authorities. In France, it was transposed into national law via the 2022 Finance Law and codified in the General Tax Code (CGI) in Article 1649 A–E and Article 344 G duodecies–vicies of Annex III.

What is the purpose of DAC7?

DAC7 enhances the transparency of transactions that take place on digital platforms, such as Malt, Fiverr, eBay, Vinted, Amazon, Uber, and Airbnb. It ensures proper reporting of revenue earned by their intermediaries.

The directive also standardises the reporting requirements of platform operators across the EU. At the same time, it simplifies the automatic transmission of data between tax authorities in various countries.

What businesses must comply with DAC7?

DAC7 applies to digital platforms that facilitate sales of goods and services or rentals of property and transportation. It applies to platforms established both within and outside the EU, as long as those platforms facilitate transactions for sellers or service providers that reside within the EU or involve real estate located in a member state.

It does not apply to platform operators that only provide payment or listing services. It also does not apply to platforms that redirect users to other platforms. Businesses dealing in cryptocurrency exchange or the sale of digital products are also exempt from the directive.

Seller and service provider reporting requirements

Platforms are required to report tax information for individuals or legal entities that use their services to carry out any of the relevant activities during the reporting period.

However, exceptions apply to public entities, publicly traded companies, and hotel operators or similar entities that have more than 2,000 real estate rental transactions within a single property facilitated by the platform operator. There are also exceptions for occasional sellers who make fewer than 30 sales during the reporting period, totalling less than €2,000.

How to comply with DAC7

To ensure tax transparency and compliance with the DAC7 directive, platform operators must follow strict collection, verification, and information reporting processes. They must also notify platform users of the reports.

Collect information

Platforms must create reliable data reporting systems that begin with onboarding processes. For example, Amazon has a DAC7 portal where sellers enter required information. Booking.com requires sellers to complete a Know Your Partner (KYP) form within 90 days of registering on the platform.

The directive requires platforms to close user accounts that fail to provide the requested information within the stated time and after two reminders. Therefore, it is important to create automated reminders and an account closure system to comply with the directive.

Verify information accuracy

Platforms must also establish a procedure to automatically verify user-provided information. They can examine documents internally or via an interface provided by a member state or hire an external provider. Information must be verified no later than 31 December.

File reports

DAC7 requires platforms to file annual reports. The following information must be reported to the tax office:

• User’s first and last name or company name
  
• Primary address
  
• Tax residence
  
• Date and place of birth (for individuals) or registration number
  
• Tax identification number (NIF) or Business Directory Identification System (SIREN) number
  
• Intracommunity value-added tax (VAT) number (if applicable)
  
• Total number of transactions made during the reporting period
  
• Total revenue earned in each quarter of the reporting period
  
• Total commissions, fees, and taxes withheld
  
• Bank account number for deposits and name on the account
  
• Identification of any permanent establishment within the EU through which the user carries out relevant transactions, specifying the member state (if applicable)
  
• Address and number of rental days for each property (for property rentals)
  

Reports must be filed with the tax office in a standardised format by 31 January of the following year.

Notify users

Digital platform operators must also notify sellers and service providers that their information will be sent to the tax office. Operators must also send users annual statements of information reported—called a “DAC7 report”—by the same deadline as the report itself.

What are the penalties for failure to comply with DAC7?

Failure to meet reporting requirements (e.g., failing to report, missing reporting deadlines, submitting inaccurate information or incomplete reports) is punishable by a fine of up to €50,000. Fines vary depending on the nature of the violation.

Operators who violate rules on diligence or notifications to sellers and service providers active on their platforms can receive a fine of no more than €50,000.

Platform operators based outside of the EU can have their individual registration numbers revoked. It is important to comply with DAC7 and implement strict collection, verification, and reporting procedures.

How Stripe Connect can help

Stripe Connect orchestrates money movement across multiple parties for software platforms and marketplaces. With Connect, you can collect payments on behalf of users, manage money transfers, distribute funds, determine income on each transaction, and record transaction data for each related account.

Connect also simplifies sales tax calculations, manages identity verifications, and ensures user compliance with Know Your Customer (KYC) laws during onboarding. Connect can help you fulfil DAC7 requirements by performing verifications and collecting information on sales and payments facilitated by your platform.