DAC7 Guide
David Hansson

DAC7: Why Is It A Good Thing For European Marketplace Businesses (UPDATED: July 2023)

Here are a few reasons DAC7 is a good thing for European marketplace businesses.

Some may argue that the adoption of DAC7 is not a good thing for EU businesses, as European marketplace businesses will incur expenses and administration as they comply. Not forgetting, sellers of goods and services (like creators) might find the request for additional information as intrusive.

However, we don’t see it as all gloomy and dark. This new Directive could offer some benefits that will impact European marketplace businesses. If you’re curious to know how DAC7 can mean a good thing for your business, read on!

Targeted marketing campaign based on collected seller’s data:

If you own a digital platform, one of your targets is probably to reach new markets and find qualified creators on your platform. With the information that DAC7 provides such as seller’s residency and total revenue, you can better understand your target market and create more personalized marketing campaigns. No doubt, this will generate more leads and revenue.

Reduction in administrative costs of digital platforms

Going by the requirements of the new Directive, one might think the DAC7 proposals will lead to more DAC7 administrative work. While this could be true to a point, as the information will now be uniform across the EU, it will create clearer processes of what European marketplace businesses and their sellers will need to do, to become compliant. We see that DAC7 will reduce the administrative burden since the platforms won’t need to deal with multiple national reporting requirements. 

Enhancing existing positive network effects of digital platforms

DAC7 also promises to increase the winner-take-it-all effect, a case where the top-performing platform takes a greater share in terms of tax benefits. By doing so, it enhances positive network effects that lead to more buyers and increased sales volumes. In the end, big retail giants will have no choice but to keep expanding.

Since every digital platform will have to comply with EU legislation, the number of buyers and sales is estimated to skyrocket. it creates a level playing field for European marketplace businesses.

Making the digital economy transparent

The core purpose of DAC7 is to foster tax transparency, thereby ensuring that taxable and hard-to-track events are taxed without sellers evading this vital tool. Many might wonder how this is a good thing, but when you look at the bigger picture, it is. 

That is good news for the public purse, as well as honest entrepreneurs. Since the new Directive targets platforms based on EU, and non-resident digital platforms that sell to the EU market, it provides a level ground for digital businesses to do business.

A new tool for a new economy

The pace of growth for digital platforms is astonishing, thus providing an avenue for the EU to revive the economy after the pandemic. That is good news to businesses and honest entrepreneurs since it prevents tax fraud, tax evasion, and tax avoidance.

This new development means that digital platforms will need a powerful and flexible VAT compliance technology to handle the additional administrative demands. That is why gig companies and individuals use Gigapay for instant salary payment that is tax compliant. Feel free to book a demo We’d be more than happy to show you how our payment system works.

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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