OECD FAQs on Model Reporting Rules for Digital Platforms

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Background

Recently, the OECD provided answers on frequently asked questions on the reporting obligations for platform operators in a FAQs document. These answers are relevant in relation to the DAC7 rules that were implemented and entered into force in the Netherlands on 1 January 2023.

Back in 2020 the OECD published the Model Rules for Reporting by platforms with respect to Sellers in the Sharing and Gig Economy. These rules were compiled to require platform to collect and report information on certain activities that have been facilitated by their platform. These requirements have been developed in light of the rapid growth of the digital economy and in response to calls for a global reporting framework as the activities facilitated by platforms may not always be visible to tax authorities or self-reported by taxpayers.

Part of this transparency framework is the Model Reporting Rules for Digital Platforms (“MRDP”). The Dutch legislator mentioned in the parliamentary history that it will follow the current and future interpretation of the OECD with regard to the reporting obligations rules and definitions for the Dutch DAC7 implementation, unless the OECD guidance explicitly is contrary with the provisions from or the intention of EU legislation regarding DAC7.

The OECD will regularly publish updates of the list of FAQs on the application of the MRDP. The first list of FAQs has been published in January 2023. The questions were received from business and government delegates. The FAQs contain three sections and we highlighted the most important answers below..

Definitions

Related entities and the Seller definition

An entity related to the platform operator can be a seller on a platform made available by the platform. This is a confirmation of the point of view taken by the Dutch legislator.

Software and platform

The definition of “platform” does not require that the software allows users to communicate directly with each other.

Software that in addition to facilitating the listing or advertising of relevant services/activities also provides a chat function or a rating system would not fall in scope of the exclusion in respect of software exclusively allowing the listing or advertising of relevant services/activities.

Consideration

It is not required that the user to which the relevant services/activities are provided also pays the consideration. The definition of “consideration” only requires that it is paid to the seller in connection with the relevant service/activity.

Intangible assets

The sale of intangible assets or goods, such as energy rights or vouchers, would not be captured by the term “goods”. With regard to vouchers, this answer is not in line with earlier explanations made by the Dutch legislator. We expect that the Dutch legislator will give a reaction on this topic.

Personal services

The definition of “personal service” requires that the service is carried out at the request of a user. This implies that the service is, at least to some extent, adapted to the specific requirements of such user.

Giving access to non-customised pre-recorded digital content (e.g. online courses, videos or music) or services that operate according to a predetermined timetable, independent from the request of one or more users, are not personal services.

Circumstances under which consideration is considered to be known or reasonably knowable

The consideration should only be reported if it is known by the reporting platform. Amounts that are not known and cannot be reasonably knowable to the reporting platform, in light of its business model, would not be treated as consideration.

In each case, the test to be applied is whether the business model of the platform operator is such that it provides visibility over the consideration to the reporting platform. At the same time, there is no expectation that the reporting platform puts in place additional procedures to gain access to information on the consideration where it is not otherwise known or reasonably knowable.

Rental of immovable property

Rental of immovable property covers both short and long-term rentals of immovable property, irrespective of the nature of the rights (freehold, leasehold, rental, usufruct, or other).

Due diligence procedures

Reporting based on seller’s tax residence

The MDRP do not foresee the option to also report on the basis of the seller’s tax residence jurisdiction, if known and different from the jurisdiction of the seller’s primary address.

Change of primary address during reportable period

The Model Rules do not foresee the possibility to report more than one primary address. The information will need to be obtained afresh and verified. This would include instances where the seller provides to the reporting platform operator a new primary address before 31 December of the reportable period (i.e. the date by which a platform must ensure that it has completed the full set of due diligence procedures with respect to a seller), whereby in such instances reporting should take place on the basis of the new primary address.

Reporting requirements

Refunds and cancellations

Refunds or cancellations should be deducted from the amount of consideration reported. Where a refund is received in respect of consideration paid or credited in a previous reportable period (i.e. after the reporting deadline), a corrected report is expected, reflecting any relevant changes in relation to the consideration paid or credited.

Mixed transaction

If a transaction involves elements of both relevant services and sales of goods, and both elements can be split or identified by the platform, both elements should be reported upon separately. Where the elements cannot be split or identified, the entire transaction should be subject to reporting.

Property Listing notion

If a landlord owns a building complex containing multiple apartments, the building would be treated as a single property listing. The number of days each sub-unit was rented should be aggregated to determine the number of days each property listing was rented during the reportable period. Similarly, the definition of excluded seller assumes the same aggregation rules.

We are glad that the OECD has offered a confirmation of answers provided earlier by the Dutch legislator and the tax authorities. However, we see that some answers are diverging from the Dutch perspective and are curious whether the Dutch tax authorities will change their point of view.