The European Union is introducing a new Directive to increase tax transparency in the digital economy. Digital platforms will be required, in order to identify, track and report revenues from merchants on these digital platforms.

DAC7 is a new addition to the already existing Directive 2011/16/EU on administrative cooperation in the field of taxation. Member States must implement DAC7 by December 31, 2022, in order to put it into effect from January 1, 2023. The digital platforms will be required to report for the calendar year 2023 for the first time in 2024, so these platforms must have implemented a process to identify sellers from January 1, 2023.

DAC7 was set up to facilitate automatic exchanges of data between the Member States about sellers on the digital platforms, whether the platform is a tax resident in the EU or outside the EU. First, the digital platforms are required to report to the competent authority in a Member State. The competent authority in that Member State then exchanges this information with the competent authority in the Member State where the reportable seller is resident for tax purposes.

The digital platforms not established in the EU will have to register in a Member State to comply with this directive.

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