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The EU’s DAC7 (Directive on Administrative Cooperation 7) directive is a landmark development in tax transparency and reporting obligations for digital platforms.
DAC7 requires platforms facilitating certain activities to collect and report detailed information about sellers using their services to tax authorities across the EU. Find out what it means for your platform business and compliance in our guide.
What is the purpose and scope of DAC7?
DAC7 aims to improve tax compliance and close loopholes that allow income generated via online platforms to go unreported and untaxed. It creates a common reporting standard for collecting relevant data on platform sellers across the EU.
Specifically, DAC7 requires reporting of income related to:
- Rental of immovable property (e.g., short-term accommodation lets, parking spaces)
- Provision of personal services (e.g., ride-hailing, freelance tasks, delivery services, tutoring)
- Sale of goods
- Rental of any mode of transport
Platforms potentially in scope include online intermediaries, e-commerce marketplaces, app stores facilitating relevant services, and sharing or ‘gig’ economy platforms. Crucially, platforms solely processing payments, merely listing or advertising relevant activities, or simply redirecting users to another platform are generally excluded from these reporting obligations.
Key Takeaways
- DAC7 requires digital platforms to report seller and transaction data to EU tax authorities annually.
- Covered activities include property rentals, personal services, sales of goods, and vehicle rentals.
- Platforms must collect and verify seller info like TINs, VAT IDs, payment details, and addresses.
- Deadlines matter: Due diligence must be completed by December 31, with reports due January 31.
- Penalties for non-compliance vary by country and may include fines, account restrictions, or withheld payments.
- Automation helps: Using integrated tools can streamline onboarding, validation, reporting, and submission.
- Tipalti simplifies DAC7 compliance with end-to-end automation tailored for EU reporting rules.
What Platforms Must Do to Comply with DAC7
- Collect and verify detailed seller information like names, addresses, TINs, VAT numbers, bank details.
- Report specified seller and transaction data annually to a single EU tax authority, which shares with relevant member states.
- Meet reporting deadlines, generally 31 January for prior year data.
- Retain records of due diligence and data collection for 5-10 years (depending on national legislation).
- Ensure your data collection and processing practices comply with the General Data Protection Regulation (GDPR), informing sellers appropriately.
Failure to comply can lead to fines and penalties determined by each member state.
By increasing transparency, DAC7 aims to ensure individuals and companies pay the right amount of tax on platform-generated income in the jurisdiction where the income arises. This helps combat offshore tax evasion and level the playing field between digital and traditional businesses.
Reporting Obligations and Data Requirements Under DAC7
DAC7 imposes strict reporting obligations on digital platforms, requiring them to collect, verify, and submit detailed seller and transaction data to the relevant EU Tax Authority. Below is a breakdown of key requirements:
Seller Identification Requirements
| Seller Type | Required Information |
|---|---|
| Individual Sellers | Full name and primary addressDate of birthTax Identification Number (TIN) and VAT ID (if applicable)Bank account details (if available) |
| Entities (Companies, Trusts, etc.) | Legal business name and registration numberMain business addressTIN and VAT ID (if applicable)Permanent establishment details in the EU (if relevant) |
| Excluded Sellers | Government agenciesPublicly traded companiesHotel chains and large providers of short-term accommodation (e.g. more than 2,000 rentals per property and year)Small sellers with less than 30 sales and sale volume below €2,000 per year |
Companies and Jurisdictions in the Scope of DAC7
Understanding which rules apply depends on the platform’s location, the seller’s location, and the location of any property rentals. Here’s a simplified breakdown:
| Platform Location | Seller Location / Activity Location | Likely Applicable Rules and Key Actions |
|---|---|---|
| EU-Based | EU Resident Seller OR EU Property | Full DAC7 compliance. Report to home Member State tax authority. |
| EU-Based | UK Resident Seller OR UK Property | UK DRR applies for these sellers/properties. Report to HMRC unless the UK recognises the EU platform’s home country DAC7 reporting as equivalent and activates exchange. DAC7 may still apply if EU residents are involved. |
| UK-Based | UK Resident Seller OR UK Property | Full UK DRR compliance. Report to HMRC. |
| UK-Based | EU Resident Seller OR EU Property | UK DRR requires reporting these EU sellers/properties to HMRC. HMRC will exchange this data with relevant EU ‘partner jurisdictions’ where equivalence is recognised. Generally, no separate EU DAC7 registration should be needed if the seller resides in a partner jurisdiction, avoiding double reporting. |
| Non-EU/Non-UK Based (e.g., US) | UK Resident Seller OR UK Property | You may need to comply with UK DRR, register with HMRC, and report relevant UK sellers/property rentals. You may be exempt if your home country has equivalent rules and an active exchange agreement with the UK. |
| Non-EU/Non-UK Based (e.g., US) | EU Resident Seller OR EU Property | Must comply with DAC7. Register in one chosen EU Member State and report relevant EU sellers/property rentals. |
| Non-EU/Non-UK Based | Only non-EU/non-UK Sellers AND no EU/UK Property Rental | Only non-EU/non-UK Sellers AND no EU/UK Property Rental |
Financial Information Requirements
- Total payments: Report all money paid or credited to each seller per quarter for facilitated activities.
- Transaction count: Report the number of transactions or activities underlying the total payments per quarter.
- Fees and taxes: Separately list any fees, commissions, or taxes charged to the seller related to the payments per quarter.
- Payment accounts: Provide financial account details (like IBAN) where the payments were sent, if available.
Timelines for Data Collection and Submission
| Requirement | Deadline | Details |
|---|---|---|
| Due Diligence | December 31 of the reporting year | Verify seller data for new each year and existing sellers (should be completed by the end of 2024) . |
| Annual Reporting | January 31 of the following year | First report (2023 data) was due Jan 31, 2024 for example. Some Member States granted short extensions for this initial report (e.g., Spain extended to April 8, 2024). |
| Data Retention | Varies by Member State (Typically 5-10 years) | Maintain records of due diligence steps and seller information. |
Penalties for Non-Compliance
Under DAC7 rules, platforms must take action if a seller fails to provide required information after receiving two reminders and expiration of a 60-day period. The prescribed actions are typically to close the seller’s account to prevent further registration, or withhold payment of any consideration until the seller provides the information.
The DAC7 Directive requires each EU Member State to set its own rules for penalties. These penalties apply when platforms break the national laws adopted under DAC7. However, the exact structure, type, and amount of fines will vary by country across the EU.
Summary of Key Obligations
- Collect: Seller IDs, transaction totals, property/vehicle details.
- Verify: Cross-check TINs/VAT IDs with EU databases.
- Report: Submit data to one EU member state by January 31.
- Retain: Store records for 5–10 years.
All platforms should also balance DAC7 compliance with GDPR obligations by informing sellers about data collection. For non-EU platforms, registration in a single EU member state is mandatory unless equivalent reporting exists under international agreements.
Turn compliance into a competitive advantage for your EU business
Tipalti takes the complexity out of DAC7 reporting—automating seller data collection, validation, and submission. Save time, reduce risk, and keep your platform focused on growth.
Compliance Challenges and Best Practices Under DAC7
Platforms face several common hurdles when ensuring compliance with DAC7 reporting requirements.
Data validation is complex. Verifying seller information like tax IDs and VAT numbers against EU databases can be challenging. Platforms may also struggle to manage discrepancies in seller-submitted data and resolve errors, especially without standardised validation tools across EU member states.
Legacy systems also pose limitations. Older platforms could face difficulty integrating DAC7 reporting into existing infrastructure while retrofitting systems to collect new data fields like property land registry numbers may prove problematic.
Seller onboarding and communication presents issues as well. Sellers can be resistant to providing sensitive information like bank accounts and birth dates and platforms also face tight deadlines to get pre-2023 seller data updated.
In addition, data security risks arise around handling sensitive seller data and GDPR conflicts can occur and penalties for breaches involving financial or identity information are steep.
Strategies for Effective Data Collection and Verification under DAC 7
Cross-border compliance is particularly difficult for non-EU platforms based outside the EU, which face indefinite reporting obligations; hence technology and effective collection and verification strategies are important.
Using Helpful Technology for Compliance
Automated compliance solutions streamline DAC7 reporting in several key ways.
Most importantly, they automatically collect complete seller data like tax IDs during onboarding, ensuring accurate information upfront.
In addition, they also help with real-time validation checks VAT and tax IDs against EU databases, flagging inconsistencies for correction, which reduces manual work and errors.
Also, some platforms can generate compliant XML/CSV files for DAC7 and UK DRR submission with a few clicks, eliminating manual formatting and enabling direct electronic filing to tax authorities for timely and accurate submissions.
By automating data collection, validation, reporting, submission, and monitoring, these tools simplify DAC7 compliance end-to-end. They transform reporting from a burden into an efficient, accurate, proactive process.
Benefits of Integrating Compliance Tools into Platform Operations
Integrating compliance technology into existing operations yields several advantages:
- Efficiency and Cost Savings: Automation reduces administrative workload, freeing up internal resources and lowering the cost of compliance.
- Accuracy and Reliability: Automated validation and data checks significantly decrease the risk of reporting errors, which helps avoid penalties and enhances data integrity.
- Scalability: Solutions are designed to handle large volumes of transactions and sellers, making them suitable for platforms of any size and supporting growth into new markets.
- Improved Seller Experience: Seamless onboarding and clear communication about compliance requirements foster trust and cooperation with sellers, reducing friction and improving platform reputation.
- Audit Readiness: Automated systems maintain robust audit trails and records, supporting both internal reviews and external regulatory audits.
- Multi-Jurisdiction Compliance: Many tools are built to support not only DAC7 but also other regimes (e.g., UK DRR, OECD MRDP), enabling global platforms to manage compliance centrally.
Preparing for Future Regulatory Changes
Anticipating Updates to DAC7 and Related Tax Directives
The regulatory landscape for digital platform tax reporting is evolving rapidly. DAC7 is only the latest in a series of EU directives aimed at enhancing tax transparency, and further changes are expected as the digital economy matures.
The European Commission has signaled ongoing efforts to harmonise and refine tax rules, with likely future updates to close loopholes, expand the scope of reportable activities, and incorporate new technologies for tax collection and data exchange. For example, trends point toward real-time reporting and faster, more secure data authentication between platforms and tax authorities.
Platforms should also be aware that similar reporting obligations are being implemented or considered in countries outside the EU, and that the OECD continues to issue new guidance and model rules that may influence both EU and global compliance frameworks.
Staying Informed About Evolving Compliance Requirements
To remain compliant and avoid penalties, platform operators must actively monitor regulatory developments at both the EU and member state levels. Key strategies include:
- Regularly review official EU and local tax authority updates for changes in reporting requirements, deadlines, and technical standards.
- Engage with professional advisors (legal, tax, compliance) to interpret new rules and assess their impact on your business.
- Participate in industry forums and subscribe to specialised compliance newsletters to receive timely alerts on regulatory changes and best practices.
- Monitor OECD and international initiatives that may affect cross-border reporting obligations or introduce new standards in the future.
Need Support with DAC7 Compliance? Tipalti Can Help.
While compliance creates short-term burdens, DAC7 promotes transparency and fair taxation in digital commerce by requiring platforms to report seller and transaction details. This helps EU member states collect owed taxes from online activities, and for smaller platforms, the long-term benefits may help offset the compliance costs.
Partnering with solutions like Tipalti ensures you have the technology and expertise to handle changing regulations smoothly and cost-effectively. Tipalti automates data collection, validation, reporting, and submission to simplify your end-to-end DAC7 compliance. Schedule a demo today to see how Tipalti’s automated tax compliance features can support your DAC7 reporting as an efficient, accurate process.
DAC7 FAQs
When does DAC7 come into effect in Spain?
DAC7 took effect in Spain in early 2024, but the effective date remains 1 January 2023 per the EU schedule. The Spanish regulations were published on 31 January 2024 and reporting obligations started 5 February 2024. The first DAC7 report was due by 8 April 2024 for 2023 data and ongoing reports are now due annually.
Does DAC7 apply to the UK?
DAC7 does not directly apply in the UK post-Brexit. The UK has implemented similar rules called UK DRR starting 2024, with first reporting in 2025. UK platforms follow UK DRR, but may still have DAC7 duties for EU activities. The UK and EU are working towards mutual recognition, which may eventually allow platforms to report in only one jurisdiction if equivalent information is exchanged between the UK and EU.
What are DAC7 obligations?
Under DAC7, platforms must collect and verify detailed seller information, report specified seller data annually to tax authorities, meet reporting deadlines (first reports January 2024 for 2023 EU data), retain records for 5-10 years, and comply to avoid potential penalties like fines. DAC7 applies to platforms facilitating relevant EU activities, with some exceptions. The key obligations are around seller data handling, tax reporting, compliance deadlines, recordkeeping, and enforcement.
Note: This text is based on information as of April 2025, may not be up-to-date when reading and is subject to change. The information in this article is intended for general guidance only and is not tax advice. Always refer to the latest specific guidance from HMRC and relevant EU tax authorities and consult qualified financial, legal and tax professionals.
