Navigating DAC 7 in Belgium: Comprehensive FAQ document published by Belgian tax authorities for digital platforms
The Belgian tax authorities have just released a comprehensive Frequently Asked Questions (FAQ) document aimed at clarifying the requirements and procedures for compliance with the DAC 7 reporting obligation.
In March 2021 the Council of the European Union adopted new transparency rules in the field of taxation under the Directive on administrative cooperation (DAC). These new disclosure rules for digital platforms, also known as DAC 7, needed to be implemented by all the EU Member States by 31 December 2022, entering into force on 1 January 2023.
In essence this directive aims to enhance transparency within the European Union regarding the income of sellers generated via so-called online platforms. To achieve this, a reporting obligation is introduced for platform operators to provide certain information about the sellers and the consideration received by them to the government. Additionally, DAC 7 imposes due diligence obligations, specifies penalties for non-compliance, and outlines reporting deadlines for platform operators. It has significant implications for digital platform businesses operating within the EU and necessitates substantial process and system changes to ensure compliance.
The new Belgian FAQ
The DAC 7 reporting obligation was already implemented in Belgian legislation at the end of 2022. However, the legislative provisions introducing the DAC 7 reporting obligation were somewhat ambiguous, leading to practical uncertainties.
To provide additional guidance and assist businesses and individuals in understanding the complexities of the DAC 7 reporting obligation, the Belgian tax authorities have released an extensive Frequently Asked Questions (FAQ) document. This FAQ acts as an informative document providing clarity on the requirements and processes associated with DAC 7.
Key highlights from the newly published FAQ include:
Scope and Reporting Requirements: The document provides detailed information on who is subject to reporting, the types of information that must be reported, and the deadlines for submission. Various examples are used to illustrate the scope of the rules. We notice a rather broad interpretation in the scope of DAC 7.
Due diligence obligations: Additional guidance is provided on the due diligence obligation and how platform operators should comply therewith. All platforms will be obliged to perform tailored due diligence on the data that will be submitted to the tax authorities.
Penalties and Enforcement: The FAQ explains the penalties for non-compliance and the steps taken for enforcement, stressing the importance of accurate and timely reporting.
Filing Procedures: The document offers additional guidance on how to file reports in Belgium
As previously mentioned, DAC 7 reporting is already in effect, and the first deadlines are quickly approaching.
Platform operators must perform due diligence on information obtained from sellers on their platform by the end of the calendar year. For 2023, this due diligence process must conclude by December 31, 2023.
Additionally, platform operators are obliged to report the relevant data elements to Belgian tax authorities. The reporting for a given calendar year should be completed by January 31 of the following year. For 2023, this reporting obligation is due by January 31, 2024.
However, for sellers registered on the platform before January 1, 2023, platform operators have an extra year to meet the due diligence requirement, extending the deadline to December 31, 2024.
Regarding the reporting obligation, if the platform operator has opted for the due diligence extension, information about sellers within the extension’s scope must be reported by January 31 of the year following the second reporting period. For instance, a reportable seller registered before January 1, 2023, and subject to the due diligence extension, should be included in the report due by January 31, 2025.
- DAC 7 will directly impact a lot of digital platform businesses, including US and UK platforms with activities in the EU
- Complying will require significant process and system changes
- Responding to the rules will likely require the involvement of a range of internal functions
- Managing the seller experience will be critical to successful implementation
- The first reporting deadline is already 31 January 2024