DAC7 – New reporting obligation for digital platforms

On the 1st of January 2023 an automatic exchange of platform-related information (DAC7) bill came into force that requires Digital Platform Operators to collect and report data on the sellers and service providers operating on their platform and the income earned by them to Estonian Tax and Customs Board. Consequently, year 2023 is the first reportable period for which the platform operators must:

• collect and verify information by 31st of December;
• forward the information to the Estonian Tax and Customs Board by 31st of January 2024.

Activity covered by reporting obligation is as follows:

• renting or leasing immovable property or part thereof;
• provision of time- or task-based service;
• transfer of tangible property;
• leasing or renting out a means of transport.

Examples of such activities would be providing accommodation via Airbnb, providing a courier or a transport service, tutoring service and rental on any mode of transport (cars, scooters, bicycles).

In order to be subject to the reporting obligation, the listed activity must be provided for a fee.

It is important to mention that platform operators do not need to report data on sellers and their earned income when remuneration earned has been declared, respective taxes withheld and paid based on the monthly payroll and income tax declaration (form TSD).

The data on payments declared in the form TSD is exchanged by the Estonian Tax and Customs Board within the framework of DAC1.

If a platform operator pays to a private individual remuneration from employment or remuneration for a service provided through the platform or rental income, the platform operator will be obliged to declare the payment in Annex 1 (resident) or Annex 2 (non-resident) to the declaration of income and social tax, unemployment insurance premiums and contributions to mandatory funded pension (form TSD) and pay all labour taxes on the remuneration from employment or service provided, and only income tax on the rental income.

The data on payments declared in Annex 1 and Annex 2 to form TSD are exchanged by the Tax and Customs Board within the framework of DAC1, which is why this data is no longer submitted to the tax authority with the DAC7 report and is not exchanged with other countries within the framework of DAC7.

Different rules apply if a platform operator makes a payment to a sole proprietor (FIE), private limited company (OÜ) or an entrepreneur account owner. Such payment is subject to DAC7 reporting obligations. In addition to abovementioned, payments made to an entrepreneur account owner must be reported in the DAC7 report. It applies to payments made to Estonian residents and non-residents.

It is important to bear in mind that fulfilling the reporting obligation of a platform operator does not affect the taxation rules of a sole proprietor (FIE), private limited company (OÜ) or an entrepreneur account owner.