DAC7 obligations: what it is and what it means for digital platforms

DAC7 is an EU directive (Dir. EU 2021/514) that imposes new tax-transparency obligations on digital platforms. Its main purpose is to make it easier to collect information about economic activity carried out through these platforms, so tax authorities can effectively monitor sellers' earnings and ensure they pay the taxes due.

DAC7 came into effect on 1 January 2023, introducing tax-reporting obligations for all platforms connecting sellers or service providers with end users, whether European or foreign platforms operating in the EU.

What is DAC7

DAC7 is part of a series of directives (DAC = Directive on Administrative Cooperation) introduced by the EU to improve tax cooperation between member states. This directive focuses on digital platforms and aims to counter tax evasion linked to the digital economy, ensuring that earnings made by sellers or service providers through these platforms are correctly declared and taxed.

The underlying idea is that many people and businesses use digital platforms to sell goods or services without always correctly declaring the income — leading to lost tax revenue. DAC7 requires platforms to collect and transmit information about sellers to tax authorities.

Who is involved

DAC7 applies to all digital platforms, European and non-European, operating in the EU and enabling sellers or providers to offer goods and services. This includes online marketplaces (eBay, Amazon), property-rental platforms (Airbnb) and digital services (Uber, Deliveroo).

These platforms must collect information about sellers, whether professionals or private individuals, when they exceed certain activity thresholds.

Obligations for platforms

Since 2023, digital platforms must collect and report to tax authorities a range of data on active sellers: identity (name, address, VAT number where applicable), earnings details (total transactions via the platform), and transaction information (number of operations, linked bank accounts).

Platforms must collect this data and send it every year to the competent tax authorities, which then share it across EU countries to ensure taxes are paid correctly.

Implications for sellers

For sellers, DAC7 means greater tax transparency. Even occasional sellers (renting a holiday home on Airbnb, for instance) need to be aware their earnings will be reported to tax authorities and correctly declared. Not all sellers will be subject to reporting — DAC7 typically applies above specific thresholds, but it's important that occasional sellers check their national rules.

Non-compliance

Platforms failing to comply with DAC7 risk significant penalties. Tax authorities in member states can impose heavy fines on platforms that don't collect or transmit the required data. Sellers who fail to declare earnings can face tax audits and evasion penalties.

To avoid problems, many platforms are already adapting their data-collection systems and informing sellers of the new obligations. Platforms may also suspend the accounts of sellers who don't provide the required information.

Conclusion

DAC7 is an important step against tax evasion in the digital economy. Digital platforms are now responsible for collecting detailed information about sellers and transmitting it to tax authorities. This new framework ensures that earnings generated via online commerce are properly taxed, promoting greater tax transparency and fair competition.