European DAC7 legislation and the obligations of platforms

The digital economy has brought new forms of doing business through online platforms, and with them new rules for exchanging tax information. The DAC7 directive is one of the areas where European changes in legislation directly affect both the operators of platforms and the people who sell goods or provide services through them. This article explains what DAC7 is about and who it applies to.

What DAC7 is

DAC7 is the name of the European directive on administrative cooperation in the field of taxation that introduces reporting obligations for operators of digital platforms. Its aim is to increase the transparency of income earned through platforms and to curb tax evasion. The directive has been transposed into Slovak legislation, so check the specific obligations and deadlines in the version of the relevant act currently in force.

Who the obligations apply to

DAC7 distinguishes between the operators of platforms and the sellers who use them. The obligations fall mainly on the following groups.

• Operators of online platforms that act as intermediaries for sales and services
• Sellers of goods through marketplace platforms
• Providers of accommodation and rentals through digital platforms
• Providers of personal services and transport through apps

What obligations the directive brings

The bulk of the obligations lies with platform operators, who must collect and verify information about their sellers and report it to the tax administration. For the sellers themselves, this means that their income from platforms is more visible and must be properly declared. A platform will usually ask for identification and tax details that you need to provide, and if they are not supplied it may restrict payouts or access to the service. Reporting also takes place across borders, so the information may reach the tax administrations of several countries.

What it means for sellers

If you sell or provide services through platforms, expect the information about your income to reach the tax administration. That is why it is important to keep your own records and to tax your income correctly, and where relevant also to assess any obligation to pay social and health insurance contributions. Do not rely on small amounts of income staying invisible – the very purpose of DAC7 is to make them visible and link them to the tax systems. Properly declaring your income protects you from additional tax payments, late-payment interest and penalties, and spares you awkward explanations during an inspection.

What to watch out for

Keep track of which platforms fall under the reporting obligation and what information they will ask you for. If you do business through several platforms, keep an overview of your income from all of them. It is also important to assess correctly whether your activity already has the characteristics of a business, which may affect your registration obligations and your obligation to pay contributions.

How to prepare

The foundation is honest records of your income and a tax return that matches reality. It helps to download the data from the platforms regularly and compare it with your own records, so that you can be sure they match. As European changes in legislation in this area keep multiplying and the conditions keep evolving, it is worth consulting an expert as soon as you start doing business through platforms. At Bilvao we will help you assess your obligations relating to income from platforms and set up your tax affairs so that you comply with current legislation and avoid unpleasant surprises.

Related articles: The Consumer Protection Act and its impact on entrepreneurs, Amendments concerning eKasa and the recording of sales, Changes in the subsistence minimum and their impact.

Frequently asked questions

Do I have to declare income from sales through online platforms?

Yes, income from platforms is taxable in the same way as any other income, and thanks to DAC7 it is more visible to the tax administration. Keep your own records and declare your income properly. The specific way it is taxed depends on the nature of your activity, so if in doubt, consult an adviser.

What information about me does the platform report?

Platform operators usually collect and report sellers’ identification and tax details together with information about the income earned. The exact scope is laid down in the legislation currently in force, so check which platforms are subject to the obligations and what information they will ask you for.