TL;DR
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New EU regulation for Platform Companies: Effective January 1, 2023, the 6th amendment to the Directive on Administrative Cooperation requires platform companies to report seller identity and earnings annually to prevent tax evasion.
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Scope and reporting: Applies to platforms in property, transport, goods, and services sectors. Companies must report to a chosen tax authority, which will share data with local authorities across the EU.
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Data requirements: Companies must collect and verify seller identity data, adhering to GDPR standards, with verification expected at eIDAS Substantial level. Failure to comply results in fines and potential termination of seller accounts.
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Collection and timeline: Data must be stored for 7 years. Registration with a tax authority is due by June 30, 2023, with reporting on 2023 activities due by January 31, 2024. Transitional period for sellers active before 2023 extends to January 2025.
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Exemptions: Casual sellers and certain types of companies, like those renting movable objects or engaging in peer-to-peer lending, are currently exempt.
Platform companies now required to extend reporting
On January 1st, 2023, a new EU regulation (the 6th amendment to the Directive on Administrative Cooperation) comes into effect which governs Platform Companies in the EU and increases their reporting requirements. Going forward, these companies need to report annually on the identity and earnings of all sellers active on their platforms.
The purpose is to increase transparency in taxable incomes and to avoid tax evasion. Companies who fail to comply will be subject to fines. Here, we will do a short summary of Who is in scope for the regulation and to Whom reporting should be done, What they need to report, How data should be collected and When it should be done.
Who is in scope for reporting?
The regulation stipulates that Platform Companies that work as Marketplaces or matches buyers and sellers in the EU need to report if they’re active in the following sectors*:
To Whom should reporting be done?
Each platform company chooses one tax authority to report to, typically in the country where they’re headquartered. This authority then receives data on all sellers in all EU countries, and is in turn responsible for sharing this data with other, local tax authorities.
For example, if the platform company is active in the Nordics and decides to report in Finland, the Finnish tax authority should receive data on identity and earnings for sellers in all Nordic countries.
What should be reported?
The purpose of the reporting is to get transparency on platform earnings for tax reasons. Hence, the reporting requirements make it possible to track seller identity and earnings. Since different EU countries use different identification measures for their citizens, data needed in different markets could potentially differ somewhat.
The data needs to be verified by the platform company either directly or via a partner, self-asserted identity information is not sufficient. How this verification should be done is not explicitly described in the regulation but it should be expected that identity information should be verified with a level of assurance corresponding to eIDAS Substantial, i.e. remote biometric verification.
If a platform is unable to collect and verify the required data, they are obliged to terminate the seller account and access to the platform. For now, casual sellers** are exempt from reporting requirements.
How should data be collected?
The platform company can choose to either collect the data itself or use partners for data collection and verification. It is explicitly stated that the data collection must correspond to GDPR requirements and include explicit consent on the part of the sellers and proper security and legal safeguards for handling the data. The data should be stored for a period of 7 years after collection to be accessible for audits.
When should data be collected and reported?
Companies need to register with a relevant tax authority no later than June 30, 2023 if they consider themselves to be platform companies. Newly started companies have 2 months until they need to register.
The regulation comes into effect on January 1st, 2023 and the first reporting period is for 2023. Reporting on 2023 should be done no later than January 31st, 2024.
New sellers entering the platform in 2023 must be identified during 2023. Platforms enjoy a transitional period for collecting identity information on sellers who joined the platform prior to 2023 until the 2024 reporting period in January 2025.
*For now, companies that rent out movable objects other than transport or engage in peer-to-peer lending are exempt, as are companies that only offer classified ads and do not take part in the actual payment process. However, it is the company itself that should evaluate whether they are subject to reporting requirements and the tax authorities will not pre-designate companies.
**Casual sellers, who sell less than 30 objects at a total value of less than 2000 EUR during a calendar year, are currently excluded from reporting requirements.