Explanatory Memorandum to COM(2020)314 - Amendment of Directive 2011/16/EU on administrative cooperation in the field of taxation - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2020)314 - Amendment of Directive 2011/16/EU on administrative cooperation in the field of taxation. |
|---|---|
| source | COM(2020)314  |
| date | 15-07-2020 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
Fair taxation is one of the main foundations of the European social market economy and amongst the key pillars of the Commission’s commitment for “an economy that works for people” 1 . Fair taxation promotes social justice and a level playing field in the EU. A fair tax system should be based on tax rules that ensure everybody pays their fair share, while making it easy for taxpayers, whether businesses or citizens, to comply with the rules. Fair and efficient taxation is crucial to safeguard sufficient revenues for public investment in people and infrastructure, while creating a business environment within the single market in which innovative firms can prosper.
The COVID-19 pandemic adds urgency to the need to protect public finances and limit its socio-economic consequences. Member States will require adequate tax revenues to finance their considerable efforts to contain the negative economic impact of the measures against the COVID-19 pandemic, while ensuring that the most vulnerable groups do not bear the burden in raising these revenues. Ensuring tax fairness by preventing tax fraud, tax evasion and tax avoidance has become more important than ever. In this context, strengthening the administrative cooperation and exchange of information is crucial in the fight against tax avoidance and tax evasion in the Union. As stressed in the Commission Communication ‘Europe's moment: Repair and Prepare for the Next Generation’ 2 , to ensure that solidarity and fairness is at the heart of the recovery, the Commission will step up the fight against tax fraud and other unfair practices. This will help Member States generate the tax revenue needed to respond to the major challenges of the current crisis.
The present legislative proposal is part of a package for fair and simple taxation supporting the recovery of the EU, which includes a Communication for an Action Plan presenting a number of upcoming initiatives for fair and simple taxation supporting the recovery strategy 3 , and a Commission Communication on Tax good governance in the EU and beyond 4 , which will review the progress made in enhancing tax good governance in the EU but also externally and suggest areas for improvement.
In the past years, the EU has focused its efforts on tackling tax fraud, tax evasion and tax avoidance and boosting transparency. While major improvements have been made in particular in the field of exchange of information, the evaluation 5 of the application of Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation 6 showed that there is still a need to improve existing provisions that relate to all forms of exchanges of information and administrative cooperation. In particular, the notions of foreseeable relevance and requests for information for a group of taxpayers emerged among the most problematic elements of the framework due to their lack of clarity.
The evaluation also demonstrated that the rules for using simultaneous controls and allowing the presence of officials of a Member State during an enquiry in another Member State lacked a legal base in some of the national systems, which currently has the outcome of preventing the efficient use of those provisions. The 2018 report of the Joint Transfer Pricing Forum on transfer pricing controls within the EU 7 discusses this point in more detail. The report drew on the existing practice of Member States to highlight current flaws and suggest possible improvements for the use of transfer pricing controls in two or more Member States. The report recommended to adopt “a coordinated approach to transfer pricing controls [that] would contribute to a better functioning of the internal market on two fronts: it would offer tax administrations a transparent and efficient tool to facilitate the allocation of taxing rights and also prevent the occurrence of double taxation and double non taxation”.
There is therefore a clear need to improve the existing framework for exchange of information and administrative cooperation in the EU. Indeed, at the start of her mandate, the president of the Commission emphasised the need to examine how cooperation between national authorities can be improved 8 . Improving the exchange of information and administrative cooperation in the EU plays a central role.
In addition to reinforcing existing rules, the expansion of administrative cooperation to new areas is required in the EU, in order to address the challenges posed by the digitalisation of the economy and help tax administrations better and more efficiently collect taxes and keep pace with new developments. The characteristics of the digital platform economy make the traceability and detection of taxable events by tax authorities very difficult. The problem is intensified in particular when such transactions are engaged via digital platform operators established in another jurisdiction. The lack of reporting of income earned by sellers for providing services or selling goods through the digital platforms leads to a shortfall of Member States’ tax revenues. It also provides sellers with an advantage compared to those who are not active on digital platforms. If this regulatory gap is not addressed, the objective of fair taxation cannot be ensured.
• Consistency with existing policy provisions in the policy area
The proposed legislation addresses the broad political priority for transparency in taxation, which is a pre-requisite for effectively fighting against tax fraud, tax evasion and tax avoidance. In recent years, EU Member States agreed a series of legislative instruments in the field of transparency as part of which national tax authorities have to cooperate closely in exchanging information. Council Directive 2011/16/EU replaced Council Directive 77/799/EEC11 and marked the beginning of enhanced administrative cooperation amongst tax authorities in the EU. It established useful tools for better cooperation in the following fields:
(1)exchanges of information on request;
(2)spontaneous exchanges;
(3)automatic exchanges on an exhaustive list of fields (i.e. income from employment; director's fees; life insurance products not covered by other Directives; pensions; and ownership of and income from immovable property);
(4)the participation of foreign officials in administrative enquiries;
(5)simultaneous controls; and
(6)notifications of tax decisions to other tax authorities.
The Council Directive 2011/16/EU was amended several times with the following initiatives:
·Council Directive 2014/107/EU of 9 December 2014 9 (DAC2) as regards the automatic exchange of financial account information between Member States based on the OECD Common Reporting Standard (CRS) which prescribes the automatic exchange of information on financial accounts held by non-residents;
·Council Directive (EU) 2015/2376 of 8 December 2015 10 (DAC3) as regards the mandatory automatic exchange of information on advance cross-border tax rulings;
·Council Directive (EU) 2016/881 of 25 May 2016 11 (DAC4) as regards the mandatory automatic exchange of information on country-by-country reporting (CbCR) amongst tax authorities;
·Council Directive (EU) 2016/2258 of 6 December 2016 12 (DAC5) as regards access to anti-money-laundering information by tax authorities;
·Council Directive (EU) 2018/822 of 25 May 2018 13 (DAC6) as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements.
• Consistency with other Union policies
The existing provisions of the Directive interact with the General Data Protection Regulation 14 (GDPR) in several instances where personal data becomes relevant and at the same time include specific provisions and safeguards on data protection. The proposed amendments will continue to follow and respect these safeguards. Any possible negative impact on personal data will be minimised by IT and procedural measures. The exchange of data will pass through a secured electronic system that encrypts and decrypts the data and, in every tax administration, only authorised officials should have access to this information. As joint data controllers, they will have to ensure secure and specific data storage.
The Commission is active in several policy areas relevant to the digital economy, including digital platform operators covered by the proposed initiative. The proposed initiative does not impinge on other simultaneously ongoing Commission projects, as it is specifically aimed at addressing certain tax related issues. It is without prejudice to any information requirements that may be considered for digital service providers as part of the Digital Services Act package in the context of the upcoming revision of the existing E-commerce Directive 15 , or under an initiative aimed at improving the labour conditions of people working through digital platforms.
The scope of the proposed rules includes crowdfunding services that consist of both investment- and lending-based crowdfunding. Considering this and in order to ensure consistency with the Union policies in the field of financial market regulation, the definition of crowdfunding services and service providers refers to the relevant legislation in that area.
Contents
- .2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
- Economic impacts
- Costs
- Scope
- Due diligence procedures
- Reporting to the competent authority
- Automatic exchange of information reported by the Platform Operators
- Effective implementation and the closure of accounts of the Sellers
- Effective penalties for non-compliance at national level
- Request for a joint audit
- The procedure
- Final report
- Corresponding adjustment
• Legal basis
Article 115 of the Treaty on the Functioning of the European Union (TFEU) is the legal base for legislative initiatives in the field of direct taxation. Although no explicit reference to direct taxation is made, Article 115 refers to directives for the approximation of national laws as those directly affect the establishment or functioning of the internal market. For this condition to be met, it is necessary that proposed EU legislation in the field of direct taxation aims to rectify existing inconsistencies in the functioning of the internal market. Furthermore, given that the information exchanged under the Directive can be also used in the field of VAT and other indirect taxes, Article 113 of the TFEU is also quoted as a legal base.
As the proposed initiative amends the Directive, it is inherent in it that the legal base remains the same. Indeed, the proposed rules that aim to improving the existing framework with respect to the exchange of information and administrative cooperation do not deviate from the subject matter of the Directive. Most notably, the envisaged modifications will provide a clear definition of foreseeable relevance and an explicit legal framework for the conduct of joint audits. The consistent application of these provisions can only be achieved through the approximation of national laws.
In addition to the existing framework, the proposal introduces rules on reporting by digital platform operators as a response to problems arising out of the use of digital platforms in various activities. The digital nature of platforms allows sellers of goods and services to make use of such digital platforms for carrying out their activity, while potentially not reporting income earned in the Member State of their residence. As a consequence, the Member States suffer from unreported income and loss of tax revenue. Such a situation also gives rise to conditions of unfair tax competition against individuals or businesses that do not carry out their activities via digital platforms, which distorts the operation of the internal market. It follows that such a situation can only be tackled through a uniform approach, as prescribed in Article 115 TFEU.
• Subsidiarity (for non-exclusive competence)
The proposal fully observes the principle of subsidiarity as set out in Article 5 TFEU. It addresses administrative cooperation in the field of taxation. This includes certain modifications in the rules to improve the functioning of the existing provisions that deal with cross-border cooperation between tax administrations from different Member States. The proposal also involves extending the scope of automatic exchange of information to digital platform operators by placing an obligation on them to report on the income earned by sellers of goods and services who make use of the relevant platforms.
The application of existing provisions of the Directive has shown significant discrepancies among Member States. While some Member States are willing to fully cooperate and exchange information, other Member States take a restrictive approach or even reject exchanges of information. Further, certain provisions have proved insufficient for addressing the needs of tax administrations in cooperating with other Member State(s) over time.
In addition, the increased use of digital platforms for providing services and selling goods has led to inconsistent declarations of income by sellers, which poses a high risk of tax evasion. While a few Member States have imposed a reporting obligation in their national law, experience shows that national provisions against tax evasion cannot be fully effective, especially when the targeted activities are carried out cross-border.
Legal certainty and clarity can only be ensured by addressing these inefficiencies through a single set of rules to apply to all Member States. The internal market needs a robust mechanism to address these loopholes in a uniform fashion and rectify existing distortions by ensuring that tax authorities receive appropriate information on a timely basis. A harmonised framework across the EU for reporting seems indispensable in particular in light of the prevalent cross-border dimension of the services provided by platform operators. Considering that the reporting obligation with respect to the income earned via the use of digital platforms aims to primarily inform tax authorities about activities with a dimension beyond a single jurisdiction, it is necessary to embark on any such initiative through action at the level of the EU, in order to ensure a uniform approach to the identified problem.
Therefore, the EU is better placed than individual Member States to address the problems identified and ensure the effectiveness and completeness of the system for the exchange of information and administrative cooperation. First, it will ensure a consistent application of the rules across the EU. Second, all digital platforms in scope will be subject to the same reporting requirements. Third, the reporting will be accompanied with exchange of information and, as such, enable the tax administrations to obtain a comprehensive set of information regarding the income earned through a digital platform.
• Proportionality
The proposal consists of improving existent provisions of the Directive and extends the scope of automatic exchanges to certain specific information reported by the digital platform operators. The improvements do not go beyond what is necessary to achieve the objective of exchanges of information and more broadly, administrative cooperation. Considering that the identified distortions in the functioning of the internal market usually expand beyond the borders of a single Member State, EU common rules represent the minimum necessary for tackling the problems in an effective manner.
Thus, the proposed rules contribute to a more clear, consistent and effective application of the Directive leading to better ways of achieving its objectives. The envisaged obligation of digital platform operators to report on the income earned by their users, i.e. the sellers, also offers a workable solution against tax evasion through the use of mechanisms for the exchange of information that have previously already been tried for DAC2 and DAC4. In this vain, one can claim that the proposed initiative represents a proportionate answer to the identified inconsistencies in the Directive and also aims to tackle the problem of tax evasion.
• Choice of the instrument
The legal base for this proposal is dual: Articles 113 and 115 TFEU, which lay down explicitly that legislation in this field may only be enacted in the legal form of a Directive. It is therefore not permissible to use any other type of EU legal act when it comes to passing binding rules in taxation. In addition, the proposed Directive constitutes the sixth amendment to the DAC; it thus follows Council Directives 2014/107/EU, (EU) 2015/2376, (EU) 2016/881, (EU) 2016/2258 and (EU) 2018/822
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Evaluations of existing legislation
In 2019, the Commission evaluated 16 the effectiveness, efficiency, relevance, coherence and EU added value of existing rules concerning administrative cooperation in the field of direct taxation. The evaluation concluded that cooperation brings about important benefits, yet there is still scope for improvement. It demonstrated that differences persist in the way Member States exploit the available tools of administrative cooperation. The information exchanged could be used more efficiently and the benefits of cooperation could be analysed in a more comprehensive manner. Building upon the evaluation, this legislative proposal presents a set of specific interventions to improve the functioning of administrative cooperation.
• Stakeholder consultations
On 10 February 2020, the Commission launched a Public Consultation to gather feedback on the way forward for EU action on strengthening the exchange of information framework in the field of taxation. A number of possible options were presented and stakeholders gave their feedback in a total of 37 responses. In addition, the Commission carried out targeted consultations by holding a meeting on 27 February 2020 with various representatives of digital platform operators. There was a consensus among representatives of digital platform operators on the benefits of having a standardised EU legal framework for gathering information from platforms, as compared to several disparate national reporting rules. In addition, the representatives of digital platform operators have advocated for a solution similar to a one-stop-shop that can be found in VAT which would enable to report the information only to the tax administration in a Member State where the platform is resident.
Concerning joint audits, the public consultation results stressed the need to enhance their role in the administrative cooperation framework at the EU level.
• Member States’ consultations
The European Commission carried out targeted consultations via a questionnaire for the Member States. In addition, on 26 February 2020, DG TAXUD organized a meeting of Working Party IV and Member States had the opportunity to debate a possible proposal for an amendment to the DAC. The meeting focused on the reporting and exchange of information on income earned through digital platforms.
Overall, broad support was recorded for a possible EU initiative for the exchange of information on income earned by sellers via digital platforms. A majority of Member States favoured a broad scope for the new legal framework that in addition to income from renting immovable property and the provision of personal services, would also include the sale of goods, rentals of any mode of transport and crowdfunding services.
• Outcome of consultations
Both public and targeted consultations seem to converge on the challenges that the new rules addressed to digital platform operators should aim to tackle: underreporting in the digital platform economy and inefficiencies; and the need to improve the current EU administrative cooperation framework, such as in the field of joint audits.
• Impact assessment
The Commission conducted an impact assessment of relevant policy alternatives which received a positive opinion from the Regulatory Scrutiny Board on 5 May 2020 (SEC(2020)271). 17 The Regulatory Scrutiny Board made a number of recommendations for improvements that have been taken into account in the final impact assessment report (SWD(2020)131). 18 Different policy options have been assessed against the criteria of effectiveness, efficiency and coherence in comparison to the baseline scenario. At the highest level of analysis, a choice is due between the status quo or baseline scenario and a scenario where the Commission would act by way of either a non-regulatory or a regulatory fashion. Non-regulatory action would consist in issuing a Recommendation. The regulatory option involved a legislative initiative to amend certain specific elements of the existing administrative cooperation framework.
A legislative amendment was identified as a preferred option when it comes to amending existing rules, in order to ensure consistency and effectiveness.
Regarding digital platform operators, the Impact Assessment indicates that the regulatory option at the EU level is the most appropriate for meeting the identified policy. The status quo or baseline scenario was shown to be the least effective, efficient or coherent option. Differently from the baseline scenario, an EU mandatory common standard would ensure that all EU tax administrations have access to the same type of data. In other words, an EU regulatory action would put all tax authorities on an equal footing when it comes to the access to information collected for an identified tax purpose. This also allows for the automatic exchange of information at the EU level on the basis of common standards and specifications. Once implemented, it is the only scenario in which the tax authorities in the Member State of a seller’s residence can verify that the seller has accurately reported its income earned via digital platforms, without the need for ad hoc, time consuming requests and inquiries. In addition, an EU mandatory common reporting standard would ensure that digital platform operators do not face fragmented national solutions when it comes to the tax related reporting obligations.
Benefits
The obligation to report income earned through digital platforms and the exchange of such information will help Member States receive a full set of information in order to collect tax revenues due. Common reporting rules will also help create a level playing field between sellers that use digital platforms and those that do not, and between digital platform operators, who currently may face very different reporting obligations. Transparency on income earned by the sellers with the use of digital platforms would increase the level playing field with more traditional businesses.
Having a single EU mandatory instrument could also have positive social impacts and contribute to a positive perception of tax fairness and to a fair-burden sharing across taxpayers. It is assumed that the broader the scope of the rules, the stronger the perception of tax fairness, given that there are issues of underreporting across all types of activities. The same reasoning applies to benefits in terms of fair-burden sharing: the wider the scope of the intervention, the better Member States can ensure that taxes due are effectively collected. The fiscal benefits of EU action are much larger where the reporting obligation has a broad scope, i.e. it applies to all services and sale of goods. Limiting the scope solely to EU-based digital platforms could significantly decrease the tax revenues of each option.
Irrespective of the scope, the one-off costs derived from implementing automatic EU-wide reporting are estimated in the order hundreds of millions of euros for the totality of the digital platform operators and tax administrations, the recurrent costs in the order of tens of millions of euros. One-off and recurrent costs are mainly due to IT systems’ development and operations. Tax administrations will also incur enforcements costs. For the sake of cost efficency, the Member States are encouraged to enable digital reporting and ensure interoperability of systems and at data level between the digital platforms and tax administrations to the extent possible.
• Regulatory fitness and simplification
The proposal is designed to reduce regulatory burdens for digital platform operators, taxpayers and tax administrations. The preferred policy response represents a proportionate answer to the identified problem since it does not exceed what is necessary for achieving the objective of the Treaties for a better functioning of the internal market without distortions. Indeed, the common rules will be limited to creating the minimum necessary common framework for reporting income earned through a digital platform. For example: (i) The rules ensure that there is no double reporting (i.e. single point of registration and reporting); (ii) the automatic exchange is limited to the relevant Member States; and (iii) the imposition of penalties for non-compliance will remain under the sovereign control of Member States. In addition, harmonisation does not go further than ensuring that the competent authorities be informed about the income earned. Thereafter, it is for Member States to decide on the tax due.
• Fundamental rights
This Directive respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union. In particular, the set of data elements to be transmitted to tax administrations are defined in a way to capture only the minimum data necessary to detect non-compliant underreporting or non-reporting, in line with the with the GDPR obligations.
4. BUDGETARY IMPLICATIONS
See Legislative Financial Statement.
5. DETAILED EXPLANATION OF THE SPECIFIC PROVISIONS OF THE PROPOSAL
The amendment proposes changes to the existing provisions on exchanges of information and administrative cooperation as well as extends the scope to the automatic exchange of information with respect to the information reported by digital platform operators. The rules on reporting for digital platform operators are inspired by the work done at the OECD.
(i) Exchange of information on request
• Foreseeable relevance
Article 5a provides for a definition of the standard of foreseeable relevance that applies in case of a request for information. The definition lays down the elements of the standard and procedural requirements that the requesting authority has to observe. The request for information can relate to one or more taxpayers, as long as they are individually identified.
As laid down in paragraph 10 of Article 8a, the standard of foreseeable relevance should not apply where request for information is sent as a follow up to the exchanged cross-border ruling or an advance pricing agreement pursuant to Council Directive (EU) 2015/2376 of 8 December 2015.
Article 17(1) is amended in order to clarify the meaning of exhaustiveness of the usual sources of information. Before requesting information, the requesting authority is obliged to exhaust all of the usual sources of information that it could have used in the circumstances for obtaining the information requested and pursued all available means. However, if by doing so the requesting authority faces disproportionate difficulties and runs the risk of jeopardising the achievement of its objectives, the obligation does not apply. In case the requesting authority did not respect this obligation, the requested authority may refuse to provide the information.
Amendment to Article 20 i will ensure the forms for the exchange of information on request are adapted accordingly.
• Group requests
Article 5b addresses group requests in the context of a request for information. Group requests relate to a group of taxpayers that cannot be individually identified, but are instead described by a common set of characteristics. Due to the nature of the request, the required information varies if a request is related to an individual taxpayer. Thus, the standard of foreseeable relevance as defined in Article 5a does not apply. Instead, the requesting authority has to provide to the requested authority a set of information including (i) a comprehensive description of the characteristics of the group; and (ii) an explanation of the applicable law and of the facts and circumstances that led to the request.
(ii) Automatic exchange of information
• Categories of income
Article 8(1) lays down the categories of income subject to mandatory automatic exchange between the Member States. Royalties are added to the categories of income which are subject to the exchange of information. The amendment will oblige the Member States to exchange all information that is available, but on at least two for taxable periods until 2024 and on at least four categories of income with other Member States with respect to taxable periods as of 2024 in accordance with Article 8(3).
• Reporting rules for platform operators will be subject to mandatory automatic exchange of information
Article 8ac lays down the scope and conditions for the mandatory automatic exchange of information which will be reported by platform operators to competent authority. Detailed rules are laid down in Annex V. As a first step, the rules provides for an obligation on the reporting platform operators to collect and verify the information in line with due diligence procedures. As a second step, the reporting platform operators have to report information on the reportable sellers, which use their platform on which they operate, to sell their goods, provide their services or invest and lend in the context of crowdfunding. The third step is about communicating the reported information to the competent authority of the Member State where the reportable seller is a resident or to the competent authority of the Member State where the immovable property is located.
Annex V, Section I provides for definitions which determine the scope of the rules for reporting.
–Who bears the burden of reporting
The rules include definitions of what is a Platform, Platform Operator and Reporting Platform Operator.
The concept of a Platform does not include software exclusively allowing the (i) processing of payments, (ii) users to list or advertise a Relevant Actvity, or (iii) redirecting or transferring of users to a Platform.
A Reporting Platform Operator is any platform operator that is either a tax resident in a Member State or is incorporated under the laws of a Member State or has its place of management or a permanent establishment in a Member State (commonly referred as ‘EU platforms’).
In addition, the scope of the rules also includes platform operators which do not meet any of these conditions but facilitate the performance of a relevant activity by reportable sellers that are residents for the purposes of this Directive in a Member State or with respect to the rental of immovable property located in a Member State (commonly referred as ‘foreign platforms’). In order to be active within the Union, such platforms have to register in a Member State (i.e. single registration) in accordance with Article 8ac i. Annex V, Section IV, paragraph F lays down the details of the registration. In order to ensure uniform conditions for the implementation of the proposed rules and more precisely, the registration and identification of Reporting Platform Operators, subparagraph 3 of Article 8ac i confers the implementing powers to adopt a standard form to the Commission. These powers shall be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council.
Platform operators already identified for VAT purposes within the Union shall not register in any Member State other than that of VAT identification.
–Which activities are reportable
A Relevant Activity includes the rental of immovable property, the provision of personal services, the sale of goods, the rental of any mode of transport, and investment and lending in the context of crowdfunding.
A Relevant Activity shall not include an activity carried out by a Seller acting as an employee of the Reporting Platform Operator.
A Personal Service is a service involving time- or task-based work performed by one or more individuals that act either independently or on behalf of an Entity. This service is carried out at the request of a user, either online or physically offline after having been facilitated via a platform.
–Whose activities are reportable
A Seller is a platform user that is registered on the platform and carries out any of the Relevant Activities. A governmental entity is not considered as a Seller.
An Active Seller is any seller that provided Relevant Activity during the reportable period.
A Reportable Seller is any Active Seller that during the reportable period (i) had its primary address in a Member State, or (ii) had a TIN or VAT identification number issued in a Member State, or (iii) for a Seller that is an entity, had a permanent establishment in a Member State. A Reportable Seller fulfilling any of the listed conditions shall be considered as a resident in a Member State for the purposes of this Directive.
In addition, any Active Seller that rented out immovable property located in a Member State during the reportable period is also a Reportable Seller.
Only the activities of a Reportable Seller are reportable.
A Reporting Platform Operators shall carry out due diligence procedures laid down in Annex, Section II in order to identify Reportable Sellers.
Paragraph B, Section II lays down the specific information that a Reporting Platform Operator needs to collect on a Reportable Seller. A Reporting Platform Operator must verify the collected information using all information and documents available to the Reporting Platform Operator in its records, as well as any electronic interface made available by a Member State or the Union free of charge to ascertain the validity of the TIN or VAT identification number. Alternatively, the Reporting Platform Operator can directly confirm the identity and residence of a Seller through an electronic identification service made available by a Member State or the Union.
A Reporting Platform Operator shall consider a Seller resident in the Member State of the Seller’s Primary Address. Where different from the Member State of the Seller’s Primary Address, a Reporting Platform Operator shall consider Seller resident also in the Member State of issuance of TIN or VAT identification number or the Member State where the Seller has a permanent establishment. In case the Reporting Platform Operator uses the electronic identification service made available by a Member State or the Union, then the Seller is considered a resident in each Member State confirmed by such electronic identification service.
A Reporting Platform Operator shall collect the required information, verify it and have it available by 31 December of the Reportable Period.
A Reporting Platform Operator may rely on the due diligence procedures conducted in previous Reportable Periods, provided that (i) the required information has been collected or verified within the last 36 months, and (ii) it does not have reason to know that the information collected has become unreliable or incorrect.
A Reporting Platform Operator may designate another Platform Operator or a third party to assume the obligations with respect to due diligence procedures.
The information, as collected and verified, shall be reported within one month following the end of the Reportable Period in which the Seller is identified as a Reportable Seller. Reporting shall only take place in one Member State (i.e. single reporting). A Reporting Platform Operator that is an ‘EU platform’ shall report in the Member State in which it fulfils any of the conditions listed in Section I, paragraph A(3) point (a). In the event that it fulfils any of these conditions in more than one Member State, the Reporting Platform Operator shall elect one Member State in which to report. A Reporting Platform Operator that is a ‘foreign platform’ shall report in the Member State in which it has registered in accordance with Article 8ac i.
Information about the Consideration and other amounts shall be reported in respect of the quarter of the Reportable Period in which the Consideration was paid or credited. The definition of the Consideration excludes any fees, commissions or taxes withheld or charged by the Reporting Platform.
In accordance with amended Article 25(3), the Reporting Platform Operators have to inform each individual concerned that information relating to this individual will be collected and reported to the authorities pursuant to this Directive and provide all information the data controllers are required to provide under the GDPR. The Platform Operators have to supply each individual all information and in any case, before the information is reported. This is without prejudice to data subject’s right under the GDPR.
The information reported by Platform Operators has to be communicated by the competent authorities of the Member States where the reporting took place to the Member States where the Reportable Seller is a resident within the meaning of Annex V, Section I, paragraph B(3)and/or the immovable property is located. Paragraph 2 of Article 8ac lays down which information shall be reported to those Member States.
The exchange will take place within 2 months following the end of the reportable period.
Such timely exchanges will provide the tax authorities with a complete set of information, to allow for preparing pre-populated yearly tax assessments.
The automatic exchange of information will take place electronically via the EU common communication network (CCN) by using an XML schema developed by the Commission.
If a Reportable Seller does not provide the required information after two reminders, the Reporting Platform Operator has to close the account of such Seller and prevent the Seller from re-registering on the Platform for the period of six months or withhold the payment of the Consideration to the Seller (Section IV, paragraph A).
Article 25a on penalties is amended to include information reported by Platform Operators in accordance with Article 8ac. This is to ensure that Member States provide for penalties to apply to cases where the obligations laid down in this Directive are not respected. The penalties provided for shall be effective, proportionate and dissuasive.
(iii) Administrative cooperation
• Presence of officials of a Member State during an enquiry in another Member State
The amendment to Article 11(1) introduces an obligation on the requested competent authority to respond to a request for the presence of an official of another Member State during an enquiry. The deadline for response is 30 days to confirm its agreement or a reasoned refusal to the requesting authority.
Article 11 i, as amended, enables interviewing individuals and examining records without the limitation of national law of the requested Member State. The option to participate in administrative enquiries through the use of electronic means of communication was also added, to address the new modes of communication.
• Simultaneous controls
Article 12(3) was amended in order to provide for a deadline of 30 days within which the requested authorities have to respond to the proposal for a simultaneous control.
• Joint audits
Section IIa is added to the Directive to lay down an explicit and clear legal framework for the conduct of joint audits between two or more Member States.
Article 12a(1) includes a definition of what is a joint audit: an administrative enquiry jointly conducted by the competent authorities of two or more Member States. The competent authorities of the Member States involved proceed, in a pre-agreed and co-ordinated manner, to examine a case linked to one or more persons of common or complementary interest to them.
–By a competent authority of a Member State
Article 12a i addresses the situation where a competent authority of a Member State requests a competent authority of another Member State to jointly conduct an audit. The requested authority shall respond to the request within 30 days from the receipt of the request.
A request may be rejected on justified grounds. Paragraph 3 of Article 12a gives a non-exhaustive list of reasons for rejection.
–By a person
Article 12a i addresses a situation where a person requests a competent authority of two or more Member States to jointly conduct an audit. The requested authorities have to respond to the request within 30 days from the receipt of the request.
A request may be rejected and the reasons for the rejection have to be notified to the requesting person.
The meaning of a person is defined in Article 3 of the Directive 2011/16/EU.
Article 12a(5) clarifies that the exchange of information related to commercial, industrial or professional secrets or to a commercial process, or information the disclosure of which would be contrary to public policy, should not be refused in the context of a joint audit. Such exchanged information should however remain confidential among the engaged competent authorities and not be disclosed to third parties.
Article 12a(6) determines that the joint audit shall be carried out in accordance with the procedural agreements applicable in the Member State where the actions of an audit take place. The evidence collected during the joint audit should be mutually recognised by all competent authorities of the participating Member State(s).
Article 12a(10) deals with the linguistic arrangements for joint audits and details that these shall be agreed by the Member States involved.
Article 12a(7) lays down an obligation on the competent authorities of participating Member States to agree on the facts and circumstances of the case and calls upon competent authorities of Member States to endeavour to reach an agreement on how to interpret the tax position of the audited person(s). The conclusions of the joint audit need to be presented in a final report. The final report of the joint audit should have equivalent legal value to the relevant national instruments that are issued as a result of an audit in the participating Member States.
In accordance with Article 12a(9), the outcome of the joint audit and the final report should be notified to the audited person(s) within 30 days of the issuance of the final report.
Article 12a(8) establishes an obligation for Member States pursuant to which in transposing the Directive, Member States have to provide for the legal framework that allows them to perform corresponding adjustments.
(iv) Other provisions
• Use of exchanged information
Article 16(1) is amended in order to clarify that the information exchanged under this Directive can be used for the administration, assessment and enforcement of VAT and other indirect taxes.
• Mandatory communication of evaluation results
Article 23 i is amended to create an obligation for Member States to examine and evaluate, in their jurisdiction, the effectiveness of administrative cooperation under the Directive and communicate the results of their evaluation to the Commission on an annual basis.
• Suspension of exchanges
Article 25(5) enables Member States to mitigate the risks of data breaches in the context of the exchange of information. In the event of a personal data breach, competent authorities of Member States, as joint data controllers, may decide to ask the Commission to suspend exchanges of information with the Member State(s) where the breach occurred.
The Commission shall restore the process for the exchanges of information after the competent authorities ask the Commission to enable again the exchanges of information under this Directive with the Member State where the breach occurred.
Such suspension comes in addition to the measures required under GDPR to address the data breach.