CfR publishes guidelines for DAC7

DAC7 - Reporting obligations of Platform Operators -

Article written by Claudine Graham

  

Council Directive (EU) 2021/514 of 22 March 2021 is the seventh amendment to Directive 2011/16/EU that introduces a new reporting framework for Platform Operations (referred to as ‘DAC 7’).  The provisions of the Council Directive were transposed into the Laws of Malta, by virtue of Legal Notice 8 of 2023 on the 20th of January 2023, amended within the Subsidiary Legislation 123.127 – ‘ Cooperation with Other Jurisdictions on Tax Matters Regulations’. 

 

The amendment to the directive introduces a new reporting framework for Platform Operators to cover both cross-border, as well as non-cross border activities and applies to all sellers of the platform, irrespective of their legal nature. These obligations also extend to third-country Platform Operators that despite not being resident for tax purposes, nor incorporated or managed or have a permanent establishment in a Member State, conduct certain relevant activities in the EU.

 

The obligations under DAC7 apply to reporting platform operators that connect suppliers of relevant activities with users (sellers) of these goods and services via a platform, being a software, such as websites and applications that allows sellers to be connected to other users. The platform operator is the entity that contracts with sellers to make available all or part of a platform to such sellers.

 

Regulation 8 of S.L. 123.127, ensures that all information exchanged pursuant to the instruments remains strictly subject to confidentiality and other safeguards as delineated in the relevant international instruments.

 

Relevant Activities:

The reporting rules apply to the following activities, net of certain fees, commissions or withholding taxes):

  • The rental of immovable property;

  • A Personal service;

  • he sale of Goods; and

  • The rental of any mode of transport

 

A “Platform” refers to any software that is accessible by users and that allows a Seller to connect to other users for purposes of carrying out a “Relevant Activity”, directly or indirectly, to such user.

 

This may be:

  • a website or a part of it,

  • applications including mobile applications, or

  • any arrangement that provides for the collection and payment of a consideration.

 

Any software which does not involve any further intervention in the carrying out of a Relevant Activity, is not considered to be a Platform. These include:

 

  • 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.

 

A ‘Reporting Platform Operator’ is a platform operator who satisfies the below.

 

a)       Is resident for tax purposes in a Member State or, where such Platform 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 a place of management, including effective management, in a Member State; or

iii. It has a permanent establishment in a Member State and is not a Qualified Non-Union Platform Operator.

 

b)      It does not satisfy any of the conditions laid down in (a) above but,

 i.   Facilitates the carrying out of a Relevant Activity by Reportable Sellers in a Member State, or

ii.  Facilitates the carrying out of a Relevant Activity which involves the rental of immovable property located in a Member State and is not a Qualified Non-Union Platform Operator.

 

A ‘Qualified Non-Union Jurisdiction’ means a non-Union jurisdiction that has an Effective Qualifying Competent Authority Agreement (hereinafter referred to as EQCAA) with the competent authorities of all Member States which are identified as reportable jurisdictions in a list published by the non-Union jurisdiction. The non-union platform operators must elect a Member State to fulfil its registration and reporting requirements unless the Platform Operator is not a Qualified Non-Union Platform Operator.

 

To satisfy this definition of ‘Qualified Non-Union Jurisdiction’ a platform operator must also.

 

a)       Be resident for tax purposes in a Qualified Non-Union Jurisdiction; or

b)      Where the Platform Operator does not have a residence for tax purposes in a Qualified Non-Union Jurisdiction, it fulfils any of the following conditions:

i.   It is incorporated under the laws of a Qualified Non-Union Jurisdiction, or

ii.  It has its place of management, including effective management in a Qualified Non-Union Jurisdiction.

 

Non-Union Platform Operators falling under the above, may benefit from either the

 

(a)    Full Switch-Off Mechanism if:

 a)       The Non-Union Jurisdiction where the non-Union Platform Operator is resident has an EQCAA covering all the Relevant Activities carried out by the Reportable Sellers of the Non-Union Platform; and

b)      The Non-Union Jurisdiction where the non-Union Platform Operator is resident has an EQCAA with all the Member States where:

i.   The Reportable Sellers are resident, and

ii.  The Reportable Sellers carry out the rental of immovable property. These Non-Union Platform Operators are not required to register and report in a Single Member State of the Union

 

Or the (b) Partial Switch-off Mechanism

 

A resident in a Non-Union Jurisdiction, may benefit from a Partial Switch-Off, if:

 a)       The Non-Union Jurisdiction where the non-Union Platform Operator is resident has an EQCAA that does not cover all the Relevant Activities carried out by the Reportable Sellers of the Non-Union Platform; and / or

b)      The Non-Union Jurisdiction where the non-Union Platform Operator is resident does not have an EQCAA with all the Member States where the Reportable Sellers are resident and the Member States where the Reportable Sellers carry out the rental of immovable property.

 

Non-Union Platform Operators benefitting from the Partial Switch-Off Mechanism are required to register and report in a single Member State of the Union. The information to be reported is information not covered by the EQCAA. That is:

 i.   Any information about Reportable Sellers who are resident in Member States not covered by the EQCAA,

 ii.  Information about Relevant Activities which are not covered by the EQCAA,

 iii.  Information about Reportable Sellers who carry out the rental of immovable property in Member States not covered by the EQCAA.

 

A Seller is reportable for DAC7 purposes if it is an Active Seller, other than an Excluded Seller, that:

a) Is resident in a Member State; or

b) rented out immovable property located in a Member State.

 

Due Diligence procedures

 

Reportable Sellers are to be subject to due diligence procedures.  For each reportable seller the following information is to be identified:

- legal name of the entity or the full name and surname of the individual seller;

- the official address;

- the Tax Identification Number (TIN) or the place of birth in the case of an individual seller.

 

An ‘Excluded Seller’ is any Seller:

 

a) That is a Government 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) For which the Platform Operator facilitated less than 30 Relevant Activities by means of the sale of Goods and for which the total amount of Consideration paid or credited did not exceed EUR 2,000 during the Reporting Period.

 

Once the Entity determines that it is classified as a Reporting Malta Platform Operator (hereinafter referred to as an RMPO), it must register with the CfR within two (2) weeks of the commencement of its activities as a Platform Operator. This applies to both RMPOs that have a nexus only with Malta, and also those Reporting Platform Operators that have a nexus with Malta and any other Member State and have chosen Malta to fulfil their registration and reporting obligations. Any changes in registration must be completed by the 31st of December of the Reportable Period.

 

An Excluded Platform Operator must register with the CfR and provide valid reasons as to its determination that the Platform Operator is excluded for that Reporting Period. This request is subject to the approval of the competent authority in Malta and a confirmation or rejection of the request will be sent within four (4) weeks of a valid application.

First Year of Registration must be entailed with the Competent Authority in Malta as a RMPO by 31st October 2023

 

Reporting Deadlines - An RMPO must report the information to the Competent Authority in Malta with respect to the Reportable Period, no later than 31st January of the year following the calendar year in which the Seller is identified as a Reportable Seller.

 

A RMPO must maintain and retain all the documentation and information it collects for the purposes of DAC 7, for a minimum period of five (5) years, starting from the end of year in which the information relates. The RMPO must also keep records of the steps it undertook in relation to any evidence relied upon for the performance of the due diligence procedures and reporting requirements.

  

Administrative Penalties

Administrative penalties are applicable in the case of non-compliance with the Rules, as identified below:

· Failure to register with the CfR - €500;

· Failure to retain documentation and information in the prescribed manner - €2,500;

· €2,500 penalty is immediately applicable for late reporting of the information and a daily penalty of €100, up to a maximum of €20,000;

· €5,000 for failure to apply the prescribed due diligence procedures;

· €200 immediate penalty and €50 daily penalty, up to a maximum of €5,000 for failure to report in a complete and accurate manner (maximum penalty of €50,000 for significant non-compliance instances); and

· Penalty varying between €10,000 to €30,000 on every senior managing official of a reporting Malta platform operator where misleading or false information is submitted unless it is proven that such individual was unaware of such act and omission and that he did everything within his power to prevent that act or omission.

 

 

Premium Accounting