Dutch DAC7 implementation: further clarification on reporting obligations, privacy, personal services and corrections has been saved
Dutch DAC7 implementation: further clarification on reporting obligations, privacy, personal services and corrections
Currently, the bill to implement DAC7 in the Netherlands from 1 January 2023 is pending in the Senate (“Eerste Kamer”). On 2 December the Dutch Secretary of Finance provided further clarification on the reporting obligations, the definition of personal services and the due diligence process.
7 December 2022
- Dutch DAC7 implementation: increase reporting obligations of digital platforms on platform sellers (18 August 2022)
- DAC7 increase of reporting obligations of digital platforms (29 August 2022)
- Dutch DAC7 implementation: further clarification on advertising exemption and reportable amounts (1 December 2022)
Currently, the bill to implement DAC7 is pending in the Senate for consideration and adoption. We refer to our DAC7 website for a complete overview of the new rules. Based on the agenda we expect that the Senate will vote for the bill on Tuesday 20 December 2022, the day before the annual Christmas break.
On 25 November the Dutch Secretary of Finance provided further clarification on reportable platforms and reportable amounts (we refer to our alert). Meanwhile, the members of the Senate had asked the Dutch Secretary of Finance to answer the questions raised by the Dutch Order of Tax Advisors (in which Deloitte also participates) on 21 November 2022. These questions cover five topics, namely the reporting obligation, group entities that sell their own products, personal data, relevant activities and correction reports. On 2 December 2022, the Dutch Secretary of Finance provided his answers (‘nota naar aanleiding van verslag’).
Reporting obligation for existing sellers
The new regulations state that for sellers who are already registered on a digital platform on 1 January 2023 (“existing sellers”), the collection and verification requirements must be completed by 31 December of the second reporting period for the reporting platform operator (i.e. 31 December 2024). This means that additional time is allowed to collect and verify the correct information from existing users. The relevant information has to be reported by 31 January 2025. Question is whether the reporting obligation of existing sellers has to cover both financial years, 2023 and 2024.
The Secretary clarifies that the information to be reported should only relate to the year in which the seller qualifies as a reportable seller. In case this is 2024, the reporting obligation will only apply to 2024. If the collection and verification requirements have already been completed in 2023 and the existing seller is therefore already designated as a reportable seller in that year, the reporting obligation will also apply to that year.
We welcome the clarification of the Secretary on this matter. This offers businesses more understanding of their reporting obligations towards existing sellers.
Another question is whether the reporting obligation also applies to group entities that sell their own products via a website of another group entity. This reporting obligations seems wide of the mark of DAC7 to combat evasion and fraud as the corporate income tax return will suffice in providing information of the concerned entities.
Unfortunately, the Secretary simply refers to the OECD Model rules and the Dutch parliamentary history of the bill and does not offer any more clarity in this respect. He starts mentioning that a seller can also be an affiliated (group) entity of the platform operator before mentioning the exception that if a company manufactures its own products, which are sold via a website of that company, this sale generally takes place under that company's own name. In that case, the reporting obligation does not apply to group entities that sell their own products via a website of another group entity. A company, in this case, means a group, being all affiliated entities together.
However, the Secretary refers to the possibility to contact the DAC7 team of the tax authorities in case there are any questions. We expect that due to the uncertainty concerning this reporting obligation and the complexity of business flows between entities within groups, businesses will often use this option. We are of the opinion that to get a better understanding of the reporting obligations the examples given in an earlier version of the bill, about a beer manufacturer that sells its own beer via a website that is part of the same group entity as that brewer, or a supermarket that offers its own products or its subsidiary's products via its "own" website should have been reinstated and further explained.
Collecting personal data
On the question whether the platform operator is allowed to collect personal data in connection with privacy legislation if it is not yet clear whether the seller qualifies as a reportable seller. According to the Secretary it follows from DAC7 that a seller below the threshold amount (i.e. less than 30 supplies of goods of which the remuneration is less than 2,000 euro), also known as a “small seller”, is not a reportable seller within the meaning of DAC7, but a so-called “excluded seller”. Therefore, the collection and verification obligations and the reporting obligation does not apply to them. DAC7 does not provide a legal basis for collecting data and information on the excluded sellers. The secretary understands that this may be a burden for platform operators and intends to monitor this method and, if necessary, to explore how this can be resolved.
We have received multiple questions from businesses in this respect who pointed out to us that keeping track of small sellers and their activities in order to monitor if and when these sellers cross the threshold creates difficulties in the onboarding process and the collecting of information about sellers. We will keep bringing this to the attention of the tax authorities.
The Secretary was also asked to clarify which activities are regarded as personal services and to give more examples. In particular, the criterion “if the user (can) have any influence on the course of the service” leads to uncertainty, as this is not included in the OECD Model rules or the commentary on these rules.
According to the Secretary, this passage attempts to clarify that to assess whether a personal service exists, it is relevant that a user has the opportunity to exert influence. This is not the case, for example, with pre-recorded digital content (such as online courses, videos or music) or a public transport timetable. The user cannot make a request for change in these examples during the course of the service. These activities are therefore not classified as personal services.
We are glad that the Secretary provides examples of services to which users cannot exert influence. However, we would have welcomed a clear distinction between live courses in which users can or cannot have an influence on the course of the service. Also, from a VAT point of view, it would have been helpful to include a reference to electronically supplied services that can be defined as services which are delivered over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention. Together with the VAT Committee guidelines on electronically supplied services this would be helpful for businesses to make a clear distinction.
The final question regards how the correction reports will work out in practice. When renting out a property, adjustments in the form of corrections may be necessary due to cancellations or additional bookings, for example.
The Secretary can imagine that correction reports will not take place in the form of a continuous process. After consultation with market parties (in which Deloitte also participates), the tax authorities are investigating what the desired frequency would be and what would be technically possible. Once or twice a year seems desirable. To be able to submit a correction, the original report must first be accepted by the tax authorities (this concerns the technical validation, not the substantive assessment of the report). A correction means that the entire notification (including the unchanged fields) must be submitted again.
Our experience with correction procedures during the implementation of the 2021 VAT e-commerce rules can help businesses to assist in filing correction reports. Obviously, we are able to contact the tax authorities and find a solution if practical issues occur.
We note that although the Secretary has not responded to all of the questions raised by the Dutch Order of Tax Advisors (in which Deloitte also participates), some important questions relevant for implementing the DAC7 have been answered. We are trying to obtain more clarity on the other questions asked.
If you have any questions about the above or other questions about DAC7, please contact your advisor.