In terms of Article 96 (2) of the Income Tax Act, the Commissioner for Revenue has released guidelines in relation to Council Directive (EU) 2021/514 of 22 March 2021.These guidelines are to be read in conjunction withOther Jurisdictions on Tax Matters Regulations (Subsidiary Legislation 123.127). CouncilDirective (EU) 2021/514 is the seventh amendment to Directive 2011/16/EU and is known as DAC 7 (the 'Directive').
DAC 7 extends tax transparency rules to digital Platforms by requiring:
- Reporting Platform Operators to collect and report prescribed information on 'Reportable Sellers' that have undertaken 'Relevant Activities' using their Platforms; and
- EU Member States to automatically exchange this information.
'Platform/s' means any software, including a website or a part thereof and applications, including mobile applications, accessible by users and allowing sellers to be connected to other users for the purpose of carrying out a 'Relevant Activity', directly or indirectly, to such users. It also includes any arrangement for the collection and payment of a consideration in respect of a Relevant Activity.
A 'Platform Operator' means an Entity that contracts with sellers to make available all or part of a platform to such sellers. A reporting obligation arises if the platform is used by sellers for the purposes of carrying out a 'Relevant Activity'.
'Relevant Activity/Activities' means any activity, whether cross-border or domestic carried out for consideration and being any of the following:
- rental of immovable property both residential and commercial.
- a personal service including time-or-task based work performed by one or more individuals acting independently or on behalf of an Entity at the request of a user.
- sale of goods being tangible property.
- rental of any mode of transport.
The term "Relevant Activity/Activities" does not include an activity carried out by a seller acting as an employee of the Platform Operator or a related Entity of the Platform Operator.
'Entity' means a legal person or a legal arrangement, such as a corporation, partnership, trust, or foundation.
The term 'Platform' however does not include software that in carrying out a Relevant Activity only allows any of the following:
- processing of payments in relation to the Relevant Activity.
- users to list or advertise a Relevant Activity.
- redirecting or transferring of users to a Platform.
'Reporting Platform Operator/s' means any Platform Operator, other than an 'Excluded Platform Operator', who is in any of the following situations:
- a resident for tax purposes in a Member State or, where such Platform Operator does not have a residence for tax purposes in a Member State, it fulfils any of the following conditions: (i) it is incorporated under the laws of a Member State; (ii) it has its place of management (including effective management) in a Member State; (iii) it has a permanent establishment in a Member State and is not a qualified Non-Union Platform Operator.
- it does not satisfy any of the conditions laid down in (a) above but facilitates: (i) the carrying out of a Relevant Activity by Reportable Sellers or a Relevant Activity involving the rental of immovable property located in a Member State; and (ii) Is not a qualified Non-Union Platform Operator.
'Excluded Platform Operator' means a Platform Operator which has demonstrated upfront and on an annual basis to the satisfaction of the competent authority that its entire business model is such that it does not have 'Reportable Sellers'
Non-EU Platform operators must also comply with DAC 7 if they facilitate Relevant Activities of sellers who are residents in the EU, or the rental of immoveable property located in the EU regardless of the place of residence of the sellers.
'Reportable Seller/s' includes a seller i.e., a Platform user, either an individual or an Entity, that carries out a Relevant Activity that is resident in a Member State or that rents out immovable property which is located in a Member State.
'Excluded Seller/s' means any seller:
- a) that is a governmental entity.
- b) that is an Entity the stock of which is regularly traded on an established securities market or a related Entity of an Entity the stock of which is regularly traded on an established securities market.
- c) that is an Entity for which the Platform Operator facilitated more than 2 000 Relevant Activities by means of the rental of immovable property in respect of a property listing during the reporting period. or
- d) of goods and for which the total amount of consideration paid or credited did not exceed EUR 2 000 during the reporting period and for which the Platform Operator facilitated less than 30 Relevant Activities during the reporting period.
A Reporting Platform Operator must register with the competent authority in Malta by 31 August 2023 and any changes therefrom must be completed by 31 December 2023.
An Excluded Platform Operator must register with the competent authority in Malta and provide proof of such classification by 31 August 2023.
Platform Operators which commence their activities after 31 August 2023 must register with the competent authority in Malta by 31 December 2023. Such Platform Operators together with Excluded Platform Operators are obliged to register within two weeks of the commencement of their activities.
The reporting obligation should cover both cross-border and non-cross-border activities and includes:
- Identification details of the sellers together with VAT and tax identification number.
- Residence of the seller to be determined as per the Directive.
- The total consideration paid or credited during each quarter of the reportable period and the number of Relevant Activities in respect of which it was paid or credited, Platform fees, commissions or taxes withheld.
- The location of the rented immovable property where relevant.
Reporting Platform Operators are required to fulfil these reporting requirements pursuant to the applicable due diligence procedures.
Reporting is made with the tax authority of the jurisdiction with which the Platform has nexus or in the jurisdiction of choice in respect of non-EU Platforms.
DAC 7 came into effect on 1 January 2023 with 31 January 2024 deadline for the reporting of 2023.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.