DAC 7

The guideline focuses on the revenue generated through the commercial use of the respective platform. This applies regardless of whether the payment for products or services was processed via the platform itself or another channel. On January 1, 2023, the corresponding law came into force in Germany with the Platform Tax Transparency Act (“PStTG”). In accordance with EU regulations, the law introduced the reporting obligation for operators of digital platforms in order to provide the German Federal Central Tax Office with the income generated by the providers subject to the reporting obligations on the respective platform. 

Platform operators must record the relevant data of such providers and report it to the competent authorities, regardless of whether the providers are domiciled inside or outside the EU. The regulations aim to ensure tax transparency and make revenue more transparent.

Third-country platform operators: Under certain conditions, the regulation also includes platform operators from non-EU countries, provided they offer their services or products within the EU and thus support taxable suppliers in the EU.

Platform operators from third countries must also be prepared to comply with European standards if they are active on the EU market. This increases the requirements for their data processing and reporting systems.

DAC 7 applies if platform operators enable third-party providers to offer or sell their goods or services via their platform. In this case, they are obliged to report information about these providers and the revenue generated by them to the competent tax authorities.

DAC 7 does not apply if only own goods or services are offered and sold via the platform and no third-party providers are involved. In this case, the website is not considered a platform within the meaning of the DAC 7 Directive.

What is a platform according to DAC 7?
The German legislator has created clarity with the law implementing Directive (EU) 2021/514:

“A platform is any system based on digital technologies that enables users to contact each other via the Internet by means of software and to conclude legal transactions aimed at 1. the provision of relevant activities (Art. 5) by providers for other users or 2. the collection and payment of remuneration related to a relevant activity. 

A platform also exists if the operator of the system concludes legal transactions with providers or other users that are aimed at numbers 1 or 2 in sentence 1. Notwithstanding sentences 1 and 2, it is not a platform if, among other things, the software exclusively enables: 1. the processing of payments made in connection with a relevant activity; 2. the listing of a relevant activity or the advertising of a relevant activity by users; or 3. the redirection or forwarding of users to a platform. (2) A platform operator is any legal entity that undertakes to make a platform available, in whole or in part, to a provider.”
 

DAC 7 came into force in the EU member states on January 1, 2023. The first reporting obligation came into force on January 31, 2024 for the reporting period of the calendar year 2023. The corresponding reporting obligation must be fulfilled once a year for the previous reporting period by January 31 of the following year. In Germany, the report is submitted electronically via an interface to the Federal Central Tax Office (“BZSt”) using a predefined data set.

Corresponding information on data transmission for the reporting obligations of digital platforms are available in the communication manual of the German Federal Central Tax Office. The department has provided information on data transmission for the 2024 reporting period.
 

The following amendments are applicable for the first time for tax periods beginning after December 31, 2024

•    Limitation of the suspension of the statute of limitations (Art. 171 (4) AO) for audited companies to a maximum of 5 years after the end of the calendar year in which the tax audit notice was announced. This regulation applies from January 1, 2025.

•    In future, the tax audit notice may request the submission of documents subject to recording or retention obligations within a reasonable period of time (Art. 197 (3) AO). If these documents have been created using a data processing system, the data must be transferred to the tax authority in a machine-readable format. If the taxpayer has submitted the documents requested together with the tax audit notice, they should be informed of the intended key audit matters (Art. 97 (4) AO). However, stating the key audit matters does not constitute a restriction of the tax audit to certain matters in accordance with Art. 194 AO; the auditor is therefore still free to audit other topics and matters at their own discretion. This regulation applies to all proceedings pending since January 1, 2023.

•    Significant tightening of transfer pricing documentation obligations: There is an obligation to submit records for cross-border business relationships with related parties during tax audits (Art. 90 (3) AO). Taxpayers must keep records of the nature and content of their business relationships. The deadline regulated in Art. 90 (4) AO is new: A deadline of 30 days after the request or – even without a request – after notification of the tax audit notice is granted for the submission of the documentation. This includes an overview of its business transactions (transaction matrix), master documentation and records of extraordinary business transactions. In justified exceptional cases, the deadline can be extended. This regulation applies to all proceedings pending since January 1, 2023. This means that complete transfer pricing documentation including a transaction matrix must be prepared in good time so that it can be submitted 30 days after a tax audit notice.

Additional information and contacts for transfer pricing documentation are available in our Transfer Pricing service area.

New binding partial audit report: The DAC 7 related legislation entails further amendments for tax audits. For example, there is now the option of a binding partial audit report (Art. 180 (1a) AO). At the competent tax authority’s discretion, individual, definable facts can be determined and concluded separately. This is done during the ongoing tax audit and before a final audit report is issued and allows legal certainty to be created for definable audit matters at an early stage. It is applicable for tax periods beginning after December 31, 2024. It also applies to taxes and tax refunds that arose before January 1, 2025 for which a tax audit notice was announced after December 31, 2024.

In addition, taxes and tax refunds arising after December 31, 2024 are no longer subject to an indefinite suspension of the statute of limitations (Art. 171 (4) AO). With DAC 7, the suspension of the statute of limitations for tax audits will generally end no later than five years after the end of the calendar year in which the taxpayer was notified of the tax audit notice; however, any further suspension of the statute of limitations under other provisions remains unaffected.

Qualified request for cooperation in the tax audit with considerable fines for delay in cooperation and sensitive surcharges: If the taxpayer does not comply with their duty to cooperate during a tax audit, the tax authorities may, at their discretion, request the taxpayer to cooperate by means of an administrative act (including an instruction on the rights to appeal; Art. 200a AO). The obligation to cooperate includes providing information and submitting books, business papers and other documents. If the taxpayer does not comply or does not sufficiently comply within a period of one month after notification, a fine for delay in cooperation may be imposed, unless such non-compliance is credibly proven to be justified. Such fine amounts to EUR 75 per full calendar day of the delay in cooperation for a maximum of 150 calendar days. A considerably more onerous surcharge on top of the fine for delay in cooperation is a maximum of EUR 25,000 per full calendar day for a maximum of 150 calendar days. This surcharge may be imposed if a fine for delay in cooperation was imposed in the five years prior to the first day of the delayed cooperation and it is to be feared that the taxpayer will not comply with the qualified cooperation request without a surcharge or if it is to be feared that the taxpayer will not meet its obligations without a surcharge due to its economic capacity. This can be assumed if the taxpayer’s sales revenue in a fiscal year covered by the audit amounts to at least EUR 12 million or the taxpayer belongs to a corporate group whose consolidated sales revenue in a calendar year covered by the tax audit amounted to at least EUR 120 million.