The world has recently been abuzz about the fierce competition from major technology corporations in the area of artificial intelligence (AI). And while every now and again one hears about the implementation and application of ever newer technological solutions in business, this rapidly changing economy is being followed by global legislation, including that of the European Union. One example of this is Council Directive (EU) 2021/514 of 22 March 2021 amending Directive 2011/16/EU on administrative cooperation in the field of taxation (Official Journal of the EU L 104/1 of 25.03.2021; hereinafter: the ‘DAC7 Directive’).
Introduction
The DAC7 Directive is a response to the problems of the extremely accelerating economic exchanges through digital platforms, which are not followed by the availability of data on income earned by taxpayers through them.
With this in mind, the European Commission has identified two potentially significant issues to be addressed, i.e. obstacles to obtaining information on the income earned by sellers using the intermediary of digital platforms and insufficiently effective cooperation between Member States’ tax administrations.
Thus, the purpose of the changes introduced through this Directive is:
- to impose reporting obligations on platforms regarding the sellers operating with the help of these platforms;
- to build a mechanism for the exchange of information on vendors between Member States and third countries, including signatories to the DPI MCAA;
- improving the current mechanisms for cooperation between administrations.
In Poland, the DAC Directive7 is to be implemented by an Act amending the Act on exchange of tax information with other countries and certain other acts. A second draft of this law was published on 24 April this year, which is currently in the Committee for European Affairs.
Who will report?
In principle, the draft act indicates that platform operators will be obliged to report certain information. According to the draft act, a platform is considered to be any software whose purpose is to enable contact between sellers and buyers and healthcare providers with healthcare recipients and to conclude transactions between them.
Importantly, the draft act imposes reporting obligations not only on platform operators that are tax resident in the Union, but also on such operators that neither have a place of management in a Member State nor have a permanent establishment in a Member State. This is to ensure a level playing field for European operators, including Polish operators.
What will be reported?
In general, the subject of reporting will be the activities of sellers, who, according to this draft act, are defined as both individuals and entities, regardless of whether they have a registered business activity.
According to the explanatory memorandum to this draft act, this broad approach to this definition is aimed at preventing tax avoidance and is intended to help the tax administration uncover sellers who attempt to hide their activities and revenues in the so-called grey market on digital platforms.
Also importantly, those activities that are the most common subject of offers on platforms ie:
- renting of real estate or parts thereof (e.g. garages, campsites, rooms, car parks);
- services provided in person (e.g. passenger transport services, transport/supply services, or small everyday services such as plumbing, building work, hairdressing services, etc.);
- the sale of goods, and
- hiring of means of transport.
What data will be transferred?
Article 75c of the proposed act indicates what should be included in the data transmitted to the Head of the National Fiscal Administration. According to it, data concerning:
- data identifying the reporting platform operator;
- data identifying the sellers – natural persons and entities (legal persons and organizational units without legal personality), as well as
- details of the sellers, including:
- the seller’s financial account identifier,
- the amount of total remuneration paid or credited during each quarter of the reporting period and the number of relevant activities for which this remuneration was paid or credited,
- the premiums, commissions or taxes withheld or collected by the reporting platform operator during each quarter of the reporting period,
- the participating country of residence of the reporting vendor.
Whose activities will be excluded from reporting?
The following are to be excluded from reporting:
- government entities;
- listed entities;
- hotel operators with more than 2 000 relevant real estate rental activities during the year, and
- ordinary taxpayers occasionally selling items (mainly second-hand) during the year (up to 30 transactions for up to EUR 2,000).
As indicated in the explanatory memorandum, the exemptions for governmental entities and those subject to exchange regulation are based on the assumption that, due to their public status, these entities are unlikely to operate in the so-called grey market.
What will the sanctions be?
As with the reporting of tax schemes, taxpayers will face unpleasant sanctions for failing to comply with or failing to comply with the reporting obligations under the DAC Directive7.
Thus, in the case of failure to comply with it upon request of the authority, the operator of the platform will be subject to a fine of up to PLN 1,000,000.
At the same time, the draft provides that persons acting on behalf of or in the interest of the reporting platform operator who fail to comply with the obligation:
- apply due diligence rules and procedures, including collection of required documentation and reporting procedures;
- register once in the Member State of their choice;
- to remedy in a timely manner any irregularities identified as a result of the inspection
– will be subject to a fine of up to 180 daily rates, i.e. more than PLN 8,000,000.
In the case of lesser gravity, the offender will be subject to a fine for a fiscal offence.
When will the above regulations come into force?
According to the current draft regulations, the regulations are expected to come into effect as early as 1 September 2023.
The information for 2023 is to be filed by the reporting platform operator between 1 January 2024 and 31 January 2024.
