DAC7 Guide
David Hansson

DAC7: What Is DAC7 And Why You Should Care (UPDATED: July 2023)

DAC7 is a new directive imposed on digital platforms by the EU council. This article will give you a quick insight on DAC7, and why you should care.

On March 22, 2021, the EU Council imposed a new Directive on Digital platforms to foster tax transparency. As you already know, the pandemic was a hard hit on the economy. 

In a bid to recover, it gave birth to the seventh Directive recently imposed on digital businesses. As many digital marketplaces achieved tremendous growth during the pandemic, despite the sad reality faced by many businesses, it has provided an avenue to resuscitate the economy.

When this new directive is implemented, digital businesses are to send relevant reportable data to the appropriate authorities. 

What is DAC7?

DAC7 is the seventh Directive adopted by the EU council with the EU Member States on taxation. Due to the rapid growth of digital platforms, and how creators or freelancers make money selling through these means, The EU council reasoned it's best to access and track these events, especially since they follow the same economic principle.

Many have feared that the new Directive comes with extra administrative burdens. Certainly not, but rather, makes it easier for digital platforms by introducing standardized reporting obligations.

Digital businesses exist to serve as a marketplace, facilitate the growth of technology, and provide a link between a buyer and a seller. Anything other than that becomes redundant and far from the core purposes.

Why should you care?

If you run a digital platform in the gig or creator economy, this likely means you facilitate personal services that require your full compliance with DAC7. If your business operates in the EU, or perhaps serves the EU market, you’re obliged to report the following relevant data about your sellers:

  • Seller’s identity
  • Tax identification details (TIN/VAT)
  • Financial Accounts
  • Address/renting period of rented property, including
  • Fees, commissions, or taxes withheld or charged by the platform.

Key benefits of compliance

DAC7 is promised to enhance tax transparency and avoid double taxation and tax evasion. Through the imposed standardized reporting, digital platforms and gig workers wouldn't have to worry about an added administrative load. Most importantly, this new Directive favors the economy and society as a whole by offering better tax benefits.

Penalty for non-compliance

Penalty for failure to comply with the 7th Directive is dependent on each EU member state, carried out in an effective, proportionate, and dissuasive manner. As a digital platform owner, you’re to ensure that sellers comply by providing the required information. 

If by any chance, a seller refuses to comply after two reminders, the digital platform can terminate the seller’s account and prevent future registrations for six months.

The only problem this new development poses to you as a digital platform owner is the extra load of administrative work. But you don’t have to lose focus meddling with tax rules when people and companies use Gigapay to solve the extra headache. 

With full compliance with the law, rest assured you wouldn't encounter any legal hurdles as you soar higher into the marketplace. Ready to become fully compliant? Go ahead and give us a call, or perhaps fill our contact form.

Would you like to know more about how this will work in practice? Go to our resource page, or read more of our blog posts below.

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