DAC 7 fully implemented in Belgium: first deadline is 31 March 2023
DAC 7 fully implemented in Belgium: first deadline is 31 March 2023
The scope of DAC 7 - as transposed into Belgian law - is broader than what one would initially suspect. Also, some definitions are not straightforward and can result in doubt as to whether an activity falls under the new registration and reporting obligations or not.
DAC 7 ‘light’
Already in 2020, in anticipation of the EU DAC 7 initiative, Belgium introduced “DAC 7 light” reporting obligations for digital platform operators in the sharing and gig economy. The transposition of DAC 7 by the Law of 21 December 2022 replaces these DAC 7 light rules as from 1 April 2023.
Purpose of the directive
DAC 7, which represents the sixth amendment to the Directive on Administrative Cooperation in the field of taxation, extends the scope of the automatic exchange of information in the EU to apply to transactions realised through digital platform operators.
The objectives of DAC 7 - which was adopted by the EU Council on 22 March 2021 - are to ensure that persons deriving income from the sale of goods or services on digital platforms pay their fair share of tax, and that EU member states automatically exchange information on income generated by sellers or service providers on the platform, regardless of whether the platform is situated in the EU.
As from 1 January 2023, DAC 7 requires platform operators to collect information from both individuals and companies offering goods or services for sale via their platform and carry out certain “due diligence procedures”. The information has to be provided to the tax authorities of the EU member state with which the platform has nexus (e.g., to the Belgian tax authorities if the platform is tax resident in Belgium). This information will be exchanged with the tax authorities of the other member states and subsequently recorded in a central EU register, accessible by all EU tax authorities.
Although the reporting obligation rests with the digital platform operator, the information to be reported is the income earned by individual sellers using the platform.
DAC 7 transposed into Belgian law
As from 1 January 2023, digital platform operators that are established in Belgium are required to introduce due diligence procedures to collect, verify, store and report information regarding the sellers or service providers on their platform.
The information concerns general data needed to identify both the platform operator and the seller(s) (e.g., name, address, tax identification number, etc.), but also financial data such as the total consideration paid to sellers, the account on which this consideration is paid, the number of transactions, etc.
Scope and relevant activities
Platform operators that fall under the new reporting obligations are operators of any software, including a website and (mobile) applications, that is accessible by users and that allows sellers to be connected to other users for the sale of goods or services - that qualify as relevant activities - to such users. It also covers any collection and payment mechanism for the account of the seller. A platform operator itself is an entity that contracts with sellers to make available all or part of a platform to such sellers.
The relevant activities in scope are:
- sale of goods
- personal services
- rental of immovable property
- rental of any mode of transport
The reporting obligation applies in relation to sellers that are resident in an EU member state and those that rent out immovable property located in an EU member state.
The term "relevant activity" does not include an activity carried out by a seller acting as an employee of the platform operator or of a related entity of the platform operator.
A platform operator that falls under the Belgian reporting obligations, is one that (exceptions apply):
(a) is tax resident in Belgium; or
(b) is not tax resident in Belgium, but:
- is incorporated under the laws of Belgium; or
- has its place of management (including effective management) in Belgium; or
- has a permanent establishment in Belgium; or
(c) is not resident for tax purposes, or incorporated or managed in a member state, nor has a permanent establishment in a member state, but facilitates the carrying out of relevant activities by reportable sellers or the rental of immovable property located in a member state. These are referred to as “non-EU platform operators”.
If a platform operator is active on the territory of several member states, it can in principle choose in which member state its meets its due diligence and reporting obligation as long as it informs the competent authorities of the other member states.
Due date to register as non-EU platform operator
A non-EU platform operator (see above) that falls under the reporting obligation needs to register in Belgium, if he has not opted for registration in another member state. This needs to be done at the moment it starts the qualifying activities, or ultimately on 31 March 2023 when it had already started carrying out qualifying activities before 1 January 2023.
If the platform operator subsequently does not fulfil the reporting obligations, its registration may be withdrawn by the Belgian authorities.
Due date to report information about the sellers
A platform operator must report the required information to the Belgian tax authorities no later than 31 January of the calendar year following the calendar year in which the seller is identified as a reportable seller. E.g., if the seller is identified as a reportable seller in the course of 2023, the reporting deadline is 31 January 2024.
The due diligence procedures must in principle be carried out by 31 December of each reporting period. 2023 is the first reporting period.
Consequences of non-compliance
A platform operator that is not or not properly complying with the DAC 7 registration and reporting rules may be subject to fines of:
- 25,000 EUR in case it does not fulfil the registration obligation (increased with 50% for each subsequent infringement);
- 50,000 EUR in case it continues its activity in Belgium after its registration has been withdrawn by the Belgian authorities (increased with 50% for each subsequent infringement);
- 1,250 EUR to 12,500 EUR in case of incomplete information being reported and 2,500 EUR to 25,000 EUR in case of fraudulent or harmful intent in this respect;
- 2,500 EUR to 25,000 EUR in case of non or late reporting and 5,000 EUR to 50,000 EUR in case of fraudulent or harmful intent in this respect.
If a seller refuses to cooperate in disclosing relevant information, the reporting platform operators will either have to close the user account of the seller or can withhold the payment to the seller.
Conclusion
Because of the broad scope of the new reporting obligations, it may very well be that not only companies active in the “digital economy” will fall under the new obligations, but also companies active in traditional industries. Also, there are still a lot of questions, for example, does a company qualify as a platform operator if the sellers are all companies belonging to the same group?
Platform operators that fall under the new obligations must react now: they need to contact sellers and service providers trading through their platform since 1 January 2023 and set up proper due diligence procedures.
How can we help?
BDO can help you understand the impact of these new rules, assess whether the rules are applicable to your business and assist you in complying with them. Want to know more? Contact your local BDO advisor or one of our International tax experts.