DAC7 (EU Directive on Administrative Cooperation)

DAC7, formally Council Directive (EU) 2021/514, amends the EU’s Directive on Administrative Cooperation in the field of taxation (DAC) to require digital platform operators to collect, verify, and report information about sellers earning income through their platforms. It is the EU’s answer to the gig and platform economy, and it gives 27 member-state tax authorities a structured annual feed of platform-derived income. For US founders running marketplaces, freelance platforms, contractor networks, or short-term rental sites with EU sellers, DAC7 is a hard compliance obligation, not optional best practice.

How DAC7 Works

DAC7 entered into force on January 1, 2023, per the European Commission’s DAC7 overview. It covers four “relevant activities” performed for consideration on a digital platform:

• Sale of goods
• Personal services
• Rental of immovable property
• Rental of any mode of transport

For each reportable seller, the platform must collect identification data (name, address, tax identification number, VAT ID where relevant, date of birth for individuals, business registration number for entities), bank account details where consideration is paid, and per-quarter consideration and number of relevant activities. The platform verifies the data using available information and reports it annually to the tax authority of the single member state in which it has registered.

Member-state tax authorities then exchange the information automatically with the authorities of each seller’s country of residence, and where rental is involved, the country where the property is located. The legal basis for the exchange is Directive 2011/16/EU as amended.

Who Must Comply

DAC7 applies to a wide definition of platform operator. A “reporting platform operator” includes:

• An entity tax-resident in an EU member state
• An entity incorporated under the laws of an EU member state
• An entity with its place of management or a permanent establishment in an EU member state
• Any non-EU entity that facilitates the relevant activities of EU-resident sellers or rental of EU-located property and is not a Qualifying Non-EU Platform Operator (a platform from a country with an equivalent reporting agreement)

A non-EU platform operator within scope must register in a single member state and report there. The reporting platform definition is broad enough to catch marketplaces, app stores with seller payouts, ride-hailing apps, food delivery platforms, freelance and contractor networks, and short-term rental sites. Excluded sellers include governmental entities, publicly traded entities, large hotel rental sellers (more than 2,000 rentals per property per year), and small goods sellers below the de minimis threshold.

Reporting Deadlines

The annual cycle runs on a calendar-year basis:

• Data collection: Continuous through the calendar year
• Verification deadline: December 31 of the reporting year
• Report due to tax authority: January 31 of the following year
• Automatic exchange between member states: By the end of February of the following year

The first reporting year was 2023, with reports filed by January 31, 2024 and exchanged by the end of February 2024.

Penalties

DAC7 itself does not set a unified penalty. Article 25a of Directive 2011/16/EU requires member states to impose “effective, proportionate and dissuasive” sanctions, and national implementations vary widely. Penalties typically combine fixed fines, per-seller fines, and possible suspension from operating with EU sellers. Repeat or willful failures can trigger criminal referral. Tax authorities also share platform-reported data internally, so an undisclosed platform income is likely to surface in an EU seller’s audit, which then traces back to the platform.

Common Pitfalls

• Treating DAC7 as a payments problem. It is a data problem. A platform that only routes money still must collect identity, residence, and consideration data on its sellers.
• Missing the non-EU operator trigger. A US platform with no EU office can still owe DAC7 reporting if it serves EU sellers. The registration is in a single member state, but the obligation is real.
• Confusing the goods threshold with services. The 30-transactions and 2,000-euro de minimis applies only to goods. Personal services, including freelance work, have no minimum.
• Stale TINs. DAC7 requires verification of seller TINs against EU and member-state TIN-on-the-web services. A seller whose TIN is structurally invalid must be flagged for follow-up before payment continues.
• Ignoring the audit trail. Tax authorities can audit the platform’s data-collection and verification procedures, not just the reports. Retain documentation.

Related Forms and Terms

• EU Platform Work Directive: adjacent EU rule that touches the same platforms but addresses classification and algorithmic management rather than tax reporting.
• Form 1099-K: US analog reporting regime that covers payment cards and third-party network transactions for the IRS.
• Permanent Establishment: a platform operator with a permanent establishment in a member state is in scope as an EU operator under DAC7.
• FATCA: another global automatic exchange of information regime, focused on US persons holding foreign accounts.

Omnivoo Contract Management captures the seller and contractor identification, residence, and TIN data required for DAC7 at onboarding, tracks per-quarter consideration, and exports a clean annual feed for your DAC7 filing in your chosen reporting member state.