DAC7 and Digital Platforms: What Individuals and Legal Entities Using Digital Platforms Need to Know
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Summary
Directive DAC7 (Directive on Administrative Cooperation 7, 2021/514/EU), transposed into Greek national law through the provisions of Law 5047/2013, introduced EU-wide reporting obligations for digital platforms with the objective of strengthening tax transparency and combating tax evasion.
This study examines the implications of DAC7 for individuals operating through digital platforms, analyzes the applicable legal framework and information-exchange mechanisms, and assesses the potential consequences and compliance strategies.
1. Legal Framework
DAC7 constitutes an amendment to Directive 2011/16/EU on administrative cooperation in the field of taxation. Its principal objectives are:
To enhance cross-border tax transparency through the reporting of financial transactions conducted via digital platforms.
To combat tax evasion and ensure tax compliance for individuals earning income through online marketplaces.
To harmonize procedures for the collection, verification, and exchange of information among EU Member States.
2. Entities Obliged to Collect and Report Information
Pursuant to Articles 2 and 3 of DAC7, a “digital platform” is defined as any technical or electronic medium that enables third parties to sell goods or provide services for consideration and that maintains a legal or commercial presence within the EU.
Indicative examples include:
Marketplaces for the sale of goods, and platforms facilitating transactions between sellers and buyers (e.g., Amazon, eBay, Vinted, and other online marketplaces where third-party sellers offer products).
Short-term rental platforms, and platforms connecting property owners with tenants (e.g., Airbnb, Booking.com, Vrbo).
Personal service platforms, and platforms facilitating on-demand services or labor (e.g., Uber, Lyft, TaskRabbit, Upwork).
Vehicle rental platforms.
Food delivery and gastronomy platforms, and platforms intermediating food orders and distribution (e.g., Wolt, efood, Deliveroo, Glovo).
DAC7 does not extend to platforms that solely process payments or merely provide listings without facilitating the transaction itself. For example:
PayPal, Stripe, Wise, Adyen – payment processors (any separate reporting obligations may arise under other frameworks, but not under DAC7).
Facebook Marketplace or Craigslist when limited strictly to listing/display functions without active facilitation of payment or transaction processing.
The determining criterion is whether the platform actively facilitates transactions, connects buyers and sellers for consideration, and intermediates economic activity.
Under DAC7, platforms are required to:
Collect users’ identification details (name, address, tax identification number, country of tax residence).
Verify such information through documentation or electronic means.
Report financial data to the competent tax authorities once minimum transaction thresholds are exceeded.
The exchange of information covering the period from 1 January to 31 December of each year must be carried out electronically by 31 January of the following reporting year, ensuring confidentiality and compliance with the technical specifications set by the European Commission.
3. Reportable Platform Users and Scope of Reporting
A “seller” (platform user) is defined as any natural or legal person registered on a digital platform who performs a “relevant activity” for consideration, whether directly or indirectly.
“Relevant activity” includes:
The sale of goods
The provision of personal services
The rental of immovable property
The rental of means of transport
Indicatively, a “seller” includes any individual using platforms to provide graphic design, consulting, legal, or IT services; property owners renting real estate; or individuals renting out vehicles.
The information exchanged includes:
Identification details of the platform.
Personal and tax identification details of the seller (individual or legal entity), such as full name/business name, tax identification number, residential address, date of birth, etc.
The type and amount of transactions (transactions carried out per date and total earnings).
Commissions or fees retained by the platform.
4. Risks for Individuals
DAC7 effectively renders income earned by individuals through digital platforms subject to potential tax scrutiny, particularly where such income has not been declared in the country of residence.
Key risks include:
Tax audits: Tax authorities may request clarifications regarding omitted or inaccurately declared income following data cross-checks.
Fines and surcharges: In cases of inaccurate or incomplete declarations, Member States’ legal frameworks provide for the imposition of additional taxes, penalties, and interest.
Cross-border exposure: The exchange of information may reveal income earned in other jurisdictions, potentially giving rise to double taxation risks.
Conclusions
DAC7 represents a pivotal development in EU tax transparency. For individuals operating through digital platforms, the Directive translates into immediate tax exposure requiring careful compliance, documentation, and ongoing vigilance.
Non-compliance or negligent reporting may result in significant financial and legal consequences. Accordingly, a thorough understanding of the legal framework and a reassessment of one’s personal tax strategy have become essential priorities for individuals deriving income from digital platforms.
