EU TAX ALERT 2021/05
- a clarification of the standard of “foreseeable relevance” as a precondition for the exchange of information on request (including in respect of “group requests”);
- the extension of the mandatory automatic exchange of information to royalties;
- a new legal framework for joint audits;
- new mandatory exchange of information for operators of certain digital platforms.
With regard to the new mandatory exchange of information for digital platform operators, which represents the main change introduced by DAC 7, the rationale behind these reporting obligations is, on the one hand, to provide the tax authorities of Member States with the information necessary to ensure the enforcement of tax rules in relation to commercial activities carried out through the intermediation of digital platforms and, on the other hand, to introduce standardised reporting requirements that should reduce the administrative burdens on the operators of such platforms.
The receiving Member State will then exchange the information received with the tax authorities of the other Member States.
- EU digital platform operators: operators that are resident for tax purposes in a Member State or, if they are not so resident, that are incorporated under the laws of a Member State or have their place of management or a permanent establishment in a Member State;
- non-EU digital platform operators: operators who do not meet any of the prior territorial connections with the EU but operate digital platforms that facilitate the carrying out of reportable activities (i) by sellers that are resident or rented out a property located in a Member State or (ii) that concern real estate properties located in Member States. These operators will be exempted from their reporting duties towards the EU authorities if they are required to fulfil similar reporting obligations to the authorities of their home country and such authorities will exchange the information with the EU authorities pursuant to a specific agreement.
EU reporting platform operators which qualify as such in more than one Member State are allowed to elect a single Member State where to carry out the reporting. Non-EU reporting platform operators are generally allowed to elect the Member State in which they register for reporting rules purposes.
The reporting digital platform operator will need to carry out specific due diligence procedures over the sellers in order to collect and verify the information necessary for the purposes of the exchange.