What is the DAC7 directive all about?
Before going into a detailed discussion of what DAC7 is, we need to clarify a few terms.
Chronology of documents
In February 2011 came Council Directive 2011/16/EU on administrative cooperation in the field of taxation. The overarching goal of the directive was to establish rules for cooperation between EU member states in the context of increasing globalization. The document specified how members of the tax administrations of the European Union countries would exchange information in order to properly tax entities operating within the Community.
In March 2021, EU Council Directive 2021/514 amending Directive 2011/16/EU on administrative cooperation in the field of taxation was released. This is what we call the DAC Directive7.
In April 2024, the Council of Ministers adopted a draft law amending the law on exchange of tax information with other countries and certain other laws. The bill aims to amend Polish law so that it also implements the EU provisions contained in the DAC Directive7.
Objectives of the DAC Directive7
The overarching goal of the EU document (as well as national laws implementing the provisions of the directive) is to develop common rules that will significantly increase the effectiveness of detecting and preventing tax fraud. The means to this end is to be common financial reporting. As part of this, operators of digital platforms will be obliged, among other things, to report on revenues generated by the said platforms. Ultimately, this obligation is to apply to all EU member states.
Who are the digital platform operators?
DAC7 implies the introduction of several new obligations for digital platform operators. Under this term are all kinds of platforms, providing vendors with the opportunity:
- execute transactions for the sale of goods,
- provision of services,
- providing means of transportation,
- provision of real estate or real estate interests.
The digital platform is therefore all kinds of marketplaces, such as Allegro.pl, OLX, Vinted or Otomoto.
New reporting obligations under the DAC directive7
According to the regulations, operators will have to provide the National Tax Administration with sets of information on vendors using their digital platforms and conducting transactions through them. The data must be submitted electronically, through a form posted on the Public Information Bulletin.
Important!
While we are all familiar with the paremma lex retro non agit (the law is not retroactive) or lex prospicit non respicit (the law looks forward, not backward), the DAC7 regulations are one of the exceptions where the new legal principles require going backward. Indeed, the reporting will cover not only the entire year 2024, but also 2023.
Why will the DAC7 work backwards?
The answer to this question is quite simple – the European Union member states have committed themselves to implementing the rules resulting from the DAC7 directive by the end of 2022. This deadline was set so that the new rules could be applied as early as January 2023.
In recent years, several bills have been drafted to implement the new regulations, but none have been enacted. This provoked a reaction from the European Commission, which called on Poland several times to immediately implement the DAC Directive7. Now (as of May 28, 2024), the Ministry of Finance has presented a draft, which was passed by a majority, and all indications are that the effective date of the legislation – July 1, 2024. – is not in danger.
What data does the operator have to provide?
Of particular importance for sellers on digital platforms is what specific information they will have to share. The list includes:
- name,
- address,
- date of birth,
- company name,
- tax ID number,
- VAT number,
- bank account number,
- the amount of remuneration received,
- the amount of taxes paid.
However, that’s not all. Depending on what exactly is being sold or what services the seller is providing, a wider range of information may need to be shared. In the case of car sales, this may include additional data on vehicle insurance. Those providing real estate (for example, for short-term rentals), on the other hand, will need to share data on the number of days the property was provided to third parties.
Every digital platform operator must also take into account the current regulations related to GDPR (RODO) – ensure due diligence, implement procedures for securing and processing personal data, etc.
Deadlines in the bill
The new regulations are expected to take effect as early as July 1, 2024. Given that, as we have already mentioned, in this case the law will work retroactively, operators must verify whether they met the criteria to be considered reporting platform operators between January 1, 2023 and June 30, 2024. If so, two additional deadlines apply to them:
- Through December 31, 2024. These entities should ensure that they follow due diligence procedures for vendors who were registered as users of the platform during the said period,
- Through January 31, 2025. These entities must perform all the prescribed reporting procedures.
What entities will not be covered by the reporting obligation?
The legislator also provided for a certain exception to the rule – it applies to sellers who completed fewer than 30 transactions in a calendar year, and their remuneration from the sale of goods or services did not exceed the equivalent of €2,000. So we are talking more about occasional sellers. Such taxpayers will not have to report income to KAS.
What are the penalties for failure to comply?
Digital platform operators, who are responsible for obtaining the information and providing it to the director of the National Tax Administration, face specific penalties for failing to comply with their obligations.
The current draft rules provide for the possibility of a fine of between 100,000 and 5,000,000 zlotys. Moreover, in some cases, the new rules allow for the possibility of imposing a penalty in the form of deleting the entity from the VAT register.
Will the DAC7 Directive have a direct impact on vendors?
At the moment, the situation does not indicate that, along with the EU document, the obligations of the vendors themselves will expand. However, it is possible that in the future the operators themselves – in order to be able to effectively obtain all the necessary data from the users of their platforms – will make some changes, for example, in the regulations.
