EU adopts tax transparency rules for digital platforms (DAC7)

Executive summary

On 22 March 2021, the Council of the European Union (the Council) adopted new rules revising the Directive on administrative cooperation in the field of taxation (Council Directive 2011/16/EU or DAC) to extend the European Union (EU) tax transparency rules reporting by digital platforms on their sellers (DAC7).

The new rules introduce a reporting obligation for digital platforms located both inside and outside the EU and an automatic exchange of information between Member States’ tax administrations on revenues generated by sellers on these platforms as of 1 January 2023. Besides introducing this new reporting obligation for digital platforms, a number of generic changes to the DAC not limited to digital platforms were also introduced, including a legal framework for the conduct of joint audits between two or more Member States as of 1 January 2024.

The new rules for information from digital platforms are inspired by the work done at the Organisation for Economic Co-operation and Development (OECD) but are much wider in terms of the scope and businesses affected.1 The revised DAC states that although not identical, the OECD Model Rules are expected to provide for the reporting of equivalent information in relation to relevant activities that are in scope of both DAC7 and the Model Rules, which may be expanded further to cover additional relevant activities.

Detailed discussion


On 7 February 2020, the European Commission (the Commission) opened a public consultation to strengthen the exchange of information framework in the field of taxation focusing on the collection and exchange of data from digital platform providers.2 A number of possible options were presented and stakeholders gave their feedback in a total of 37 responses. As part of a tax package for fair and simple taxation supporting the recovery of the EU released on 15 July 2020,3 the Commission published DAC7, a legislative proposal for revision of the DAC, to address the challenges posed by the digital platform economy.4 The proposal of the Commission would follow the special legislative procedure in the EU that is applicable to taxation. This procedure involves consultation of the European Parliament and requires final decision making in the Council, requiring unanimity among all 27 EU Member States.

On 27 November 2020, EU Member States agreed on the revised Draft DAC7 and have made the new text (pdf) available on the EU website. Following this, the European Parliament provided its non-binding opinion on 10 March 2021, concluding the consultation process.

Revised Directive on administrative cooperation (DAC7)

On 22 March 2021, the Council unanimously adopted the revised DAC7 to strengthen administrative cooperation and include reporting of sales through digital platforms. The revised text of DAC7, as adopted by the Council, still follows the objectives of the Commission’s original proposal (pdf) of 15 July:5

  • Introducing reporting requirements for online platforms and a related Exchange of Information (EoI) framework
  • Expanding existing administrative assistance rules, including the introduction of automatic EoI on royalties and facilitation of joint audits

Compared to the initial proposal (pdf) by the Commission on 15 July 2020, there are some changes on the scope and the timeline for implementation of the new reporting requirements. Among others, crowdfunding activities have been removed from the scope of the proposal. Also, in the initial proposal, the new provisions would apply as of 2022. In the final text, EU Member States will have to adopt the proposed amendments to the DAC by 31 January 2022 and apply the new provisions from 1 January 2023. The final text also provides for the reporting of data no later than 31 January of the year following the calendar year in which the Seller is identified as a Reportable Seller, i.e., by 31 January 2024 for those sellers identified in 2023. In addition, non-EU platforms would be relieved from reporting to EU tax administrations “in cases where adequate arrangements exist, ensuring that equivalent information is exchanged between a non-Union jurisdiction and a Member State.” 

As mentioned above, DAC7 is much wider in terms of scope and businesses affected than the OECD Model rules (pdf) published in July 2020. One of the main differences in terms of scope is the inclusion of sale of goods in DAC7, which is currently not in scope of the OECD Model Rules. Also, it is not clear whether a non-EU digital platform would be relieved from reporting to an EU tax administration if that platform is subject to OECD-type rules in its home state. Even if the OECD Model rules would qualify as EU equivalent, an appropriate EoI framework would be required between the home state and the Member State concerned.

Following the Commission’s proposal (pdf), the adopted DAC7 also includes other amendments to the DAC to improve the exchange of information and cooperation between Member States' tax authorities, including a definition of the term ”foreseeable relevant,” the introduction of automatic EoI rules on royalties and rules on group requests. In relation to joint audits, a new section to the DAC is introduced to set forth an explicit and clear legal framework for the conduct of joint audits between two or more Member States. This framework will be operational in all Member States from 2024 at the latest.

Next steps

Following the formal adoption of DAC7 by the Council, Member States will have until 31 January 2022 to transpose the amendments into national law. The new provisions will apply as of 1 January 2023 and the first reporting of data will be required by 31 January 2024.

Meanwhile, the Commission has already started its work on the next iteration of the Directive (DAC8) with regard to the exchange of tax-relevant data for new alternative means of payment and investment, such as crypto assets and e-money. On 10 March 2021, the Commission launched a public consultation process on the future revision of the DAC8, with the feedback period ending on 2 June 2021. The Commission expects to put forth a proposal in the third quarter of 2021.


The adopted amendments underline the continued intention of the EU to develop and expand on tax transparency as a means of ensuring tax compliance. The obligation to report income earned through digital platforms and the exchange of such information is aimed at helping Member States receive a full set of information on sellers on the digital platforms. A harmonized framework across the EU for reporting is aimed at increasing legal certainty and providing more clarity to the digital platform operators, who currently may face different reporting obligations in individual counties.

Notably, the reporting obligations are wider than the obligations proposed by the OECD and are not limited to platforms in the EU. Since the obligations extend to platforms facilitating sellers resident in the EU or concerning immovable property in the EU, the impact of the proposal is global. With the proposed entry into effect on 1 January 2023, digital platforms should timely establish due diligence and information collection processes.

Affected companies should assess what changes to their processes and technology might be needed to enable reporting of the type contemplated in the revised DAC7.

Similarly, taxpayers should closely assess the other expansions of administrative cooperation within the EU, including on joint audits and the automatic EoI of royalties.

For additional information with respect to this Alert, please contact the following:

EY Société d’Avocats, Paris
  •  Jean-Pierre Lieb 
Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Munich
  • Klaus von Brocke 
Ernst & Young Belastingadviseurs LLP, Rotterdam
  • Marlies de Ruiter 
  • Maikel Evers 
Ernst & Young Belastingadviseurs LLP, Amsterdam
  • Konstantina Tsilimigka 
Ernst & Young LLP (United States), Global Tax Desk Network, New York
  • Jose A. (Jano) Bustos