Belgian tax authorities publish FAQ on application of DAC 7 implementation law

On 18 October 2023, the Belgian tax authorities published a set of frequently asked questions (”FAQ”) (Dutch I French) regarding the reporting obligations for digital platform operators that have been effective in Belgium as from 1 January 2023. The requirements were implemented into domestic legislation via the law of 21 December 2022 and are based on Council Directive (EU) 2021/514 of 22 March 2021 amending Directive 2011/16/EU on administrative cooperation in the field of taxation (commonly referred to as “DAC 7”).

The FAQ (54 pages) provide guidance on the application of the rules by digital platform operators, including definitions of technical terms, due diligence obligations, reporting obligations, and sanctions.

This alert highlights some of the key clarifications provided by the Belgian tax authorities in the FAQ:

• Contrary to what one might expect, the fact that the platform operator and the seller are related entities is not a reason for a reporting exclusion.
• Indirect transactions may give rise to DAC 7 reporting requirements. For example, situations where the platform operator procures the relevant activity from its sellers and offers the relevant activity in its own name, while relying on the sellers to perform the relevant activity, are covered by the DAC 7 reporting obligations. However, an exclusion applies when the platform operator that procures the relevant activity offers the activity in its own name but the activity is performed by its employees or employees of a related entity of the platform operator.
• Indirect transactions of goods are not captured. The FAQ clarify that where a platform operator purchases goods from a wholesaler (or supplier) in a traditional way and subsequently sells the goods in its own name via the platform, the wholesaler (or supplier) does not qualify as a seller.
• Personal services that are not targeted by the DAC 7 reporting requirements include the provision of access to non-customised digital content such as videos, music, or courses to users. Personal services that are purely ancillary to the overall transaction and only of secondary importance are also excluded.
• The platform operator must report the amount of consideration that is known, or “reasonably knowable,” to the platform operator. According to the FAQ, consideration is reasonably knowable even if the actual consideration deviates from the consideration initially agreed upon by the relevant parties on the platform.
• Excluded platform operators must file an electronic request form with the Belgian tax authorities to obtain the status of excluded platform operator. This form must be filed annually by 15 January of the year following the reporting year and must in principle be accompanied by supporting documents.
• Due diligence procedures must be complied with in a timely manner. For sellers that are possibly excluded (e.g., due to low sales volumes of goods) the platform operator must perform due diligence procedures immediately the seller is registered and may not wait and see if a particular seller will become excluded by the end of the reporting period.
• If due diligence procedures have not been performed for certain sellers (e.g., as a result of the additional extension of one year applicable to existing sellers that were registered on the platform before the implementation of the law), those sellers cannot be included in the reporting due on 31 January of year N+1 for year N information. In that case, the platform operator should file a corrective report in year N+2.
• The reporting platform operator must keep records of all steps taken and of all information used to perform due diligence procedures and to comply with its reporting obligations to the Belgian competent authorities. These records must be retained for 10 years.
• Information received may be used for the collection of income taxes, VAT, inheritance and gift taxes, and various other duties and taxes, as well as registration, mortgage, and court fees.

Deloitte comments

While the FAQ provide some useful clarification, a number of substantial questions remain unanswered, including how the reporting obligation should be fulfilled in transactions between related parties or in an indirect context. Some additional explanations using specific examples would therefore be welcome.

In addition, the fact that related entities of the platform operator can be considered as sellers raises the question of whether this measure does not go beyond the purpose of DAC 7, i.e., combating tax fraud, tax evasion, and tax avoidance in the context of the digitalisation of the economy.

Furthermore, it is clear from the FAQ that platform operators must be vigilant with respect to their due diligence procedures as the Belgian tax authorities do not seem to accept additional extensions (except for those provided for by the law). Platform operators would be advised to prioritise establishing adequate internal processes for this purpose. 

Reporting and filing guidelines

Practicalities regarding the electronic data transfer (interface and data format) are expected to be available shortly on the DPI—DAC 7 e-service page.

Although the first reporting for digital platform operators is not due until 2024, operators should consider taking action now to ensure that the required data is readily available and the reporting process is implemented on time.