Otázky a odpovědi GFŘ k DAC7

Questions and Answers of the GFD on DAC7

We keep you informed about the new reporting obligations for digital platform operators. The Czech implementation of this initiative can be found HERE.

General information

The main objective of this initiative is to extend the automatic exchange of information framework to a new range of information reported by digital platform operators. Simplistically, a platform is a software that allows a seller to connect with another user in order to carry out defined reportable activities for consideration. These activities are broadly 4 sets of activities:

• the provision of immovable property, by all means of provision of the property for use by another, e.g. by leasing or providing accommodation, where immovable property includes e.g. housing units, houses, agricultural land, parking spaces.
• the provision of a means of transport, e.g. cars, motorcycles, bicycles or scooters.
• personal service, which means an activity of an individual based on time or a task at the request of the user of the platform (e.g., the activity of cleaning, performing craft work, etc.).
• sale of goods, which in practice may be e.g. various web-based marketplaces or e-shops that broker the sale of goods from other sellers.

The rules contain a number of exemptions from reporting platform operators or reportable sellers. As with other reporting obligations, the amended Act also introduces additional registration or notification obligations in this context, detailed due diligence procedures to identify and verify sellers, and penalties for breaches of related obligations, for example.

Selected platform operators will be obliged to report information to the tax authorities once a year (always by 31 January) regarding the income generated by selected users of these platforms (sellers).

The year 2023 will be the first reporting period (i.e. in 2024).

Questions and answers

In this context, the General Financial Directorate (GFD) has published questions and answers on this new obligation (more details HERE). Below we briefly summarise selected observations.

DAC7 application

• The Financial Administration will operate the so-called Authenticated Zone DAC7 (or DAC7 application), which is to be an environment on the MY Taxes portal, where the platform operator logs in and from where it can notify a change in registration data, report the termination of the reporting obligation, report the fulfilment of a condition for exclusion from the reporting obligation, etc.

Notification of the Czech reporting platform operator

• The notification of the Czech reporting platform operator for the reporting obligation can only be submitted electronically via the MY Tax portal. After processing the notification, the Czech reporting platform operator will receive a notification on the granting of access to the DAC7 application.
• The Czech reporting platform operator's notification form is bilingual - the tax administrator accepts completion in Czech or English. However, it is possible that situations may arise where the tax administrator may additionally require a translation into Czech.
• A platform operator who has become a Czech reporting platform operator no later than 75 days after the date of entry into effect of the Act in question (i.e. 1 January 2023) shall submit the notification no later than 3 months after the date of entry into effect of the Act in question, i.e. by 3 April 2023.

Registration of a non-established reporting operator

• In case the non-established reporting operator does not have the possibility of authentication, the non-established platform operator will submit an application for registration (generally accepted to be completed in English) without authentication. The SFO, after processing the non-established platform operator's registration application, will issue a registration decision whereby the non-established reporting platform operator will be assigned a platform identification number (IIN) and will also be assigned a password to log into the DAC7 application.

Practical examples

• As an example of what is not in the scope of the DAC7 notification obligation, the GFD gives the following examples:
  • Advertisement sites that only allow promotion (advertisement in the form of a so-called "bulletin board" only without the provision of other functions by the platform operator), e.g. rental property, where the advertisement offers a connection with the seller only by direct contact, e.g. by providing a telephone or email contact directly to the seller. The connection between the seller and the user is thus made directly, not through the advertising platform.
  • An e-shop where products are offered to end consumers only on behalf of the e-shop operator - selling their own products on behalf and for the account of the e-shop operator without further intervention by a third party.
  • The platform operator has included on its website the reportable activity of the seller, including the contact details of that seller. The buyer contacts the seller directly. The conclusion of a contract between the buyer and the seller is not facilitated via the platform, nor is the value of the consideration for the notified activity collected via the platform.
• As an example of what the reporting obligation under DAC7 instead applies to, the GFD gives the following examples:
  • The platform operator has listed the seller's reportable activity on its website, including the contact details of that seller and the price for the notifiable activity. The platform operator facilitates the conclusion of a contract between the buyer and the seller through the platform, e.g. by allowing an order to be placed. However, the consideration for the notified activity is not collected through the platform and the final amount of consideration paid to the seller may be higher, equal to or lower than the amount listed on the platform operator's website.
  • The platform operator has listed the vendor's reportable activity on its website, including the contact details of that vendor and the price for the reported activity. The platform operator facilitates the conclusion of the contract between the buyer and the seller through the platform and collects the consideration for the reportable activity through the platform.
  • An e-shop offering goods from other sellers, if other sellers whose products are offered on the e-shop also enter into a contractual relationship with the buyer when selling the products.
• As regards lessors of software - e-shop solutions, i.e. merely leasing space and software to the operator of an e-shop, the GFD indicates that it is unlikely to be a reporting platform operator, adding that if the e-shop or website operated in the leased space would meet the characteristics of a platform under the Act, then the lessee/operator of the e-shop or website would be the reporting platform operator, acting vis-à-vis the users of the platform.

If you have any questions, please contact the author of this article or the EY tax team with whom you regularly work.

Author:

Karel Hronek