Belgian tax administration publishes DAC7 guidelines

Since 1 January 2023, digital platform operators are obligated to perform due diligence on their sellers, implement governance measures and report information on specific transactions carried out by these sellers. With the completion of the due diligence required before the end of this year, and the first reporting due on 31 January 2024, important deadlines for platform operators are rapidly approaching. To assist platform operators in fulfilling their obligations, the Belgian tax administration has published guidelines in the form of FAQs, highlighting specific aspects of the reporting framework. The FAQs (NL/FR) confirm and emphasize the broad scope of application of the regime and the various associated notions. Although the FAQs provide necessary clarification regarding some aspects of the framework, certain questions are still left unanswered and might create practical challenges for reporting platform operators.
 

Due diligence and reporting obligations for digital platforms

Following the adoption of the European Directive 2021/514 (DAC7), the Belgian legislator has transposed the relevant provisions of DAC7 into the Belgian Income Tax Code at the end of 2022. Under this regime, digital platforms that operate software (such as websites or mobile applications) facilitating specific activities for their users, are required to perform due diligence, introduce governance measures, and report information on those transactions to the tax authorities. The reportable activities are limited to the sale of goods, the rental of immovable property and transportation and the provision of ‘personal services’.

In terms of due diligence measures, reporting platform operators must obtain and verify information from the sellers registered on their platforms. Existing platform operators must complete this process by 31 December 2023. By the same date, platform operators must also document the due diligence measures they have adopted. It is crucial that they establish and implement policies and procedures for this purpose. Furthermore, providing internal training to familiarize their staff with these new obligations is recommended. 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.

By 31 January 2024, platform operators are obligated for the first time to report information regarding their active sellers to the tax authorities and to the respective sellers themselves. After this reporting, the Belgian tax authorities will share this information with the tax authorities of the relevant European member states.
 

FAQs emphasize broad scope of application

Through FAQs, the Belgian tax administration has stressed the extensive scope of the regime. This wide-reaching scope emanates from the broad interpretation of the various components that define the reporting regime and determine whether there is a reporting platform.

The FAQ’s interpretation covers many aspects, with one of them pertaining to the facilitating function of the platform. To trigger the reporting obligations, a platform must facilitate the conclusion of an agreement regarding a relevant activity between a seller and a platform-registered user. According to the FAQs, facilitation doesn’t necessitate that the agreement be reached on the platform. Neither does it require that the payment related to the activity is facilitated by the platform. Consequently, platform operators need to be vigilant and assess how they might come under the purview of the reporting framework.

While DAC7 excludes certain platforms from the scope of application because their level of facilitation is deemed too low to trigger reporting obligations, the FAQs have emphasized the restrictive interpretation of these exceptions. Only in very specific situations will a platform operator be excluded from the due diligence and reporting obligations.

The reporting regime exclusively applies to sellers offering specific activities. Nevertheless, the FAQs once again adopt a broad interpretation of the four categories of relevant activities. In particular, the ‘sale of goods’ and ‘personal services’ are interpreted broadly, possibly leading the unexpected applications of the reporting regime.
 

Impact on the financial sector

Due to the broad interpretation of various key notions within the reporting framework and the broad range of services provided by financial institutions, DAC7 plays an important role in the financial sector. Therefore, it is important for these companies to assess whether their current and future services and digital applications (websites and mobile applications) fall within the scope of DAC7.

For institutions falling under the reporting framework, processes need to be implemented to conduct due diligence before the end of this year and complete reporting by 31 January 2024.
 

How we can help

With the first deadline rapidly approaching, we recommend that financial institutions:

• assess whether they fall under the scope of application of DAC7, and if so

• conduct due diligence on their sellers by 31 December 2023, and adopt policies and procedures that align with these requirements,

• be prepared to perform the first reporting by 31 January 2024.

EY possesses extensive experience and expertise in all aspects of the DAC7 reporting obligation. We can help you assess your DAC7 reporting obligations, develop internal policies and procedures, design the necessary due diligence procedure and prepare the reporting of seller information with the tax authorities, supported by the tools we have developed.