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DAC7 (Directive on Administrative Cooperation, 7th iteration) is an EU directive requiring digital platform operators to collect, verify, and annually report seller data to their national tax authority before 31 January each year. If your platform facilitates personal services, goods sales, property rental, or transport rental involving EU-based sellers, you must comply.
There is a growing amount of buzz around DAC7, and how it will expand the EU-wide Tax Authority cooperation, while also helping member states address the challenges of the ever-increasing digital economy.
But this is not without some drawbacks for business owners, since there's a lot of burden on certain platforms within the scope of DAC7. With the implementation of DAC7 live, we have put together some actionable tips to help business owners get ready.
By the end of this article, you'll learn more about what obligations you have following the implementation of DAC7 and how your platform can get ready.
Here are five key actions you can take now:
1. Consider If You're Affected
First, you need to understand and examine the activities of your platforms and their users to know if you're affected. A quick way to find out is to determine if your platform facilitates Relevant Activities, such as:
- Rental of immovable property
- Personal services
- Sales of goods
- Rental of any mode of transport
It's important to examine all aspects of your business to know whether it provides reportable services within the scope of DAC7.
If you are unsure whether you are in scope, the safest approach is to assume you are and proceed with a compliance review. The cost of preparation is far lower than the cost of sanctions.
2. Run A Data Gap Analysis
When your platform is within the scope of DAC7, your next step should be running a gap analysis to determine what data you collect today and what data are missing par DAC7 requirements.
Also, the data collection and storage process must be evaluated from an operation, legal, and privacy perspective. Key data points to check for gaps include: TIN, VAT number, full legal name, primary address, date of birth (for individuals), and annual earnings per seller. If you are missing any of these, the gap analysis will tell you.
Therefore, how you handle seller's data is as crucial as complying with the DAC7 directive.
3. Consultation
After running a GAP analysis, you need to engage your team or internal stakeholders, including teams as diverse as legal, commercial, data privacy, and engineering. Collaborating with the right internal players to get ready for DAC7, is key to success.
A practical way to kick off this consultation is to schedule a single cross-functional meeting with legal, data privacy, and engineering. The goal of that meeting should be to agree on who owns each step of the compliance process - collection, verification, storage, and reporting.
That way, you can start early in your preparation without risking sanctions. In other words, the more you know about DAC7 and its purpose, the better your platform can adapt.
4. Create A Project Plan
The new directive requires your platform to collect massive amounts of sensitive data to be reported to the relevant tax authorities. In that case, you have to develop a reliable process of collection and review of data to prevent a data breach.
It’s best if you work closely with your team to develop a project plan that aids better data management. Also, consider some of the lessons of GDPR and let them guide you toward staying compliant with DAC7.
Your project plan should include: a data gap analysis owner, a deadline for closing data gaps, a verification method for TINs and VAT numbers, a process for chasing non-responsive sellers, and a confirmed reporting date well before 31 January.
5. Stay In The Loop
As DAC7 fast approaches, the best you can do is to stay engaged by paying attention to your local tax authorities as guidance and regulations are developed.
While DAC7 might incur another administrative load, your mindset regarding this new development will help you scale through. For instance, it's promised to foster tax transparency in a digitized economy, thereby eliminating double taxation and tax evasion.
Platforms that treat DAC7 as an opportunity to build cleaner seller data processes often find secondary benefits: better seller verification reduces fraud, and standardized data makes future EU compliance changes easier to adapt to.
Gigapay automates DAC7 data collection, TIN verification, and annual reporting for digital platforms. If you want to see how it works in practice, visit our DAC7 page or book a demo with our team.
FAQ
Q: How do I know if my platform is affected by DAC7?
A: Your platform is affected by DAC7 if it facilitates any of these Relevant Activities: rental of immovable property (e.g. holiday homes, parking spaces), personal services, sales of goods, or rental of any mode of transport. If your platform connects sellers offering these activities to buyers within the EU, you fall within DAC7's scope.
Q: What is a DAC7 data gap analysis and why do I need one?
A: A DAC7 data gap analysis is a review of the seller data your platform currently collects versus the data required under the DAC7 directive - such as TIN, full name, primary address, and date of birth. Running one tells you exactly what information you are missing so you can build processes to collect it before the 31 January reporting deadline.
Q: Which internal teams need to be involved in DAC7 preparation?
A: DAC7 preparation should involve your legal, commercial, data privacy, and engineering teams at minimum. Legal and data privacy teams ensure your data collection complies with both DAC7 and GDPR. Engineering builds or integrates the collection and verification systems. Commercial teams handle seller communications and onboarding process updates.
Q: What happens if my platform doesn't comply with DAC7?
A: Sanctions for DAC7 non-compliance vary by EU member state but must be effective, proportionate, and dissuasive. In the Netherlands, for example, platforms can be fined up to €900,000 and risk criminal prosecution. Early preparation and a clear project plan are the best ways to avoid these penalties.
Q: When is the DAC7 reporting deadline?
A: DAC7 reports must be submitted annually before 31 January each year, covering seller data and earnings from the previous calendar year. This is a recurring annual obligation.
