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European Union

12 March 2021

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European Parliament Adopts DAC7 Proposal with Amendments

The European Parliament has issued a release concerning the adoption on 10 March 2021 of the proposal for a Council Directive amending Directive 2011/16/EU on Administrative Cooperation in the Field of Taxation (DAC7), with amendments. DAC7 is meant to ensure that EU Member States will automatically exchange information on the income generated by sellers through digital platforms.

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Better cooperation between national authorities on taxation of digital trading

  • Tax authorities should share information more quickly
  • Sanctions should be introduced for platforms and need to be harmonised
  • Non-EU platforms must register in an EU member state where they have substantial economic activity

On Wednesday, MEPs recommended changes to draft legislation aiming to trace and tax the sales that people make through online platforms more effectively.

The legislation, spearheaded through the EP by Sven Giegold (Greens, DE), aims to oblige digital platforms to report the income earned by those selling goods and services on their platforms. Tax authorities would also be obliged share this information with each other. It was adopted by 568 votes in favour, 63 votes against, and 64 abstentions.

Platforms need to register in the EU and can face sanctions

Non-EU platforms should be required to register and report their activities in the single market in a single member state, and must have substantial economic activities in the chosen member state. Moreover, MEPs opted to provide for harmonised sanctions against platforms that do not fulfil their reporting obligations.

Quicker exchange of requested information

A tax authority receiving a request for information should provide it no later than three months, rather than six months, from the date it receives the request. By the end of 2022, the Commission should submit a report assessing country-by-country how well the system works, including how effective the information exchanges are.

Scope of the automatic and compulsory exchange of information

A tax authority should automatically communicate to the authority of another member state not only the information that is available but also that which could reasonably be made available.

As from 1 January 2022, no new bilateral or multilateral advance pricing arrangements should be agreed by member states with third countries that do not permit their disclosure to the tax authorities of the other member states.

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