Malta transposes DAC7 into domestic law

Pursuant to the formal adoption by the Council of the European Union (‘EU’) on 22 March 2021, Malta transposed EU Directive 2021/514/EU, amending Directive 2011/16/EU (‘DAC7’) on administrative cooperation in the field of taxation, into domestic legislation, by way of Legal Notice 8 of 2023 on 20 January 2023, to be amended within Subsidiary Legislation 123.127, ‘Cooperation with Other Jurisdictions on Tax Matters Regulations’.

Scope

The obligations under DAC7 apply to reporting platform operators that connect suppliers of certain goods and services with users (‘Sellers’) of these goods and services via a platform, being any software, such as websites and applications, that allows Sellers to be connected to other users. A platform operator is an entity that contracts with Sellers to make available all or part of a platform to such Sellers. The term reporting platform operator applies not only to certain EU platform operators but also to those which are non-EU platform operators, subject to certain carve-outs. A Seller is a reportable Seller when it is resident in an EU Member State and carries out a relevant activity in an EU Member State or rents out immovable property situated there.

Impact on business

The reporting rules comprise the following relevant activities, being activities carried out for consideration (net of certain fees, commissions, or withholding taxes) and being any of the following:

• Immovable property rental;
• Personal services for time-based or task-based work;
• Sale of goods; and
• Rental of any mode of transport.
  
  

Information to be reported

A reporting Malta platform operator would need to report information to the Commissioner for Revenue (‘CfR‘) by no later than 31 January of the year after the calendar year in which the Seller is identified to be a reportable seller. An election for simplified reporting shall be made available by means of guidelines published by the CfR, however, such guidelines as at the time of writing have not yet been published. The information to be reported by a reporting Malta platform operator includes information such as name, registered office address, the TIN, the business name(s) of the relevant platforms.

Due diligence procedures

Due diligence procedures should be undertaken for the purpose of identifying reportable Sellers. Information to be collected for each reportable Seller includes: the legal name of an entity or the name and surname of an individual, where applicable; the primary address; any issued TIN or the place of birth of an individual Seller, where applicable; VAT number; business registration number, amongst others.

Penalties

The penalties are administrative in nature and include:

• €500 for failure to register with the CfR in the prescribed manner;
• €2,500 for failure to retain documentation and information in the prescribed manner;
• €5,000 for failure to apply the prescribed due diligence procedures;
• €2,500 immediate penalty for late reporting of the information and a daily penalty of €100, up to a maximum of €20,000;
• €200 immediate penalty and €50 daily penalty, up to a maximum of €5,000 for failure to report in a complete and accurate manner, and a maximum penalty of €50,000 for significant non-compliance; and
• €10,000 to €30,000 in penalties on every senior managing official of a reporting Malta platform operator where misleading or false information is found to have been submitted unless it is proven that such individual was unaware of such act and omission and that he did everything within his power to prevent that act or omission.
  

Next steps for platform operators

It is essential that entities operating digital platforms determine whether they may be impacted by DAC7 and the steps to implement suitable information collecting and reporting systems. A reporting Malta platform operator should register with the CfR, however, the manner and time period within which registration is to be completed has not been prescribed as at the time of writing and such information is expected to be stipulated in the CfR guidelines once published.

Deloitte's view

DAC7 represents a significant development in the global tax transparency framework, by broadening the remit of exchange of information to certain digital platform operators conducting business in the EU to share certain seller-level data, partly in response to the rapid digitalisation of the economy but also to standardise the approach across the internal market so as to reduce administrative and compliance costs for platform operators already subject to the various unilateral measures introduced by certain EU Member States.