New DAC7 rules for reporting digital platforms. Increased tax transparency and reporting obligations for operators and sellers.
Malta’s Commissioner for Revenue has recently published guidelines on reporting obligations for Digital Platform Operators (DAC 7). This initiative, based on Article 96(2) of the Income Tax Act, aims to enhance tax transparency in online business activities.
Download DAC7 guidelines released by CFR Malta.
Council Directive (EU) 2021/514, known as DAC 7, is the seventh amendment to Directive 2011/16/EU and extends tax transparency rules to digital platforms. These new provisions require Platform Operators to collect and report information on “Reportable Sellers” engaging in “Relevant Activities” through their platforms.
But what constitutes “Relevant Activities”? This term includes any commercial activity, both domestic and international, such as renting immovable property, providing personal services, selling goods, and renting transportation. Activities carried out by sellers acting as employees of the Platform Operator or related entities are not considered “Relevant Activities.”
Platforms involved in these DAC7 reporting obligations include any software, website, or mobile application that connects sellers with other users for business activities. Platforms that only facilitate payment or allow users to list or advertise activities are not subject to these new provisions.
Key highlights of applying DAC7 in Malta
The main requirement introduced by DAC 7 is for Platform Operators to report information on Reportable Sellers, including their tax and VAT identification numbers, total commercial activities conducted, and corresponding fees or taxes withheld. This information must be submitted to the relevant tax authorities in the platform’s jurisdiction or a chosen country for non-EU platforms.
Reporting platforms will play an active role in ensuring transparent and tax-compliant business activities.
A key aspect of these DAC7 new directives is the registration of Platform Operators. They must register with the competent authority in Malta by 31st August 2023, and any changes must be reported by 31st December 2023. Platforms commencing activities after 31st August 2023 have a two-week registration window.
DAC 7 came into effect on 1st January 2023, with the reporting deadline for 2023 activities set for 31st January 2024.
These DAC7 new regulations aim to promote tax fairness in the digital economy by reducing the potential for tax avoidance through online platforms. However, it is crucial for Platform Operators to fully understand and comply with the new rules to avoid possible penalties. Cooperation among EU member states in information exchange is essential to ensure the effectiveness of these new provisions and create a more transparent and fair digital business environment.
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