DAC 7: everything you need to know about reporting requirements for marketplaces and other online operators

I. Who is affected by the DAC 7 obligation?

a) Which operators are affected by this obligation?

In other words, the DAC 7 regulation imposes a reporting obligation on platform operators who:

1. Provides users (sellers or service providers),
2. A networking tool,
3. Through an electronic device,
4. To carry out certain economic operations directly or indirectly.

More specifically, the operators concerned are those:

1. Which display ads from sellers or suppliers, allowing the user to contract directly with them (“direct” connection).
2. Who ensure an “indirect” relationship, that is to say, an opaque intermediary role: the operator buys and then resells the good or service, while remaining at the center of the contractual relationship.

The following do not fall within the scope of this obligation:

• Operators providing only payment functions related to the activity.
• Actors content themselves with referencing sellers (directories) or promoting them in advertising.
• Services that redirect or transfer the user to another platform, without playing an active role in the connection.

b) What are the activities concerned?

The system, included in article 1649 ter A of the CGI, targets operations relating to the collaborative economy and the on-demand economy. The tax authority mentions:

• The sale of goods.
• The provision of a service by natural persons (or “personal service”) through a legal entity or not.
• The rental of means of transport (cars, scooters, boats, etc.).
• The rental of real estate (apartments, houses, etc.).

Thus, cryptocurrency exchange activities (subject to DAC8) or the sale of digital products (ebook, film, etc.) are not within the scope of this system.

Since January 1, 2023, this system only applies to transactions carried out as of this date. However, before this deadline, platforms already had to comply with similar reporting obligations in France under previous regulations (article 242 bis of the CGI).

c) Does the system also apply to foreign operators?

Yes. According to article 1649 ter B of the CGI, a platform operator may be subject to DAC 7 when it is in one of the following situations:

1. Operator residing in France.
2. European operator meeting one of these three conditions (your choice):
   • Have its head office in France,
   • Have a permanent establishment in France,
   • Be constituted according to French legislation.
3. Operator established outside the EU, but which combines the following two conditions:
   • Facilitates the carrying out of transactions for sellers/service providers domiciled in an EU Member State (or involving goods located in a Member State),
   • Chooses France to fulfill its reporting obligations.

If the operator is established both in France and in several other Member States, he may decide to centralize his declaration in one of them, after notification to the competent authorities. On the other hand, an operator domiciled in a State or territory that has concluded an automatic data exchange agreement with France may be exempt from this declaration for transactions already covered by that agreement.

Note: similar principles apply in other EU countries. For example, a Belgian operator declares in Belgium first. Moreover, this system is gradually being extended to the OECD level: in the United Kingdom, a similar system has been in effect since 1 January 2024, with data sharing to certain European states.

II. What does the platform have to declare?

Article 1649 ter D of the CGI sets out the conditions under which the platform operator must:

1. Collect the information necessary to identify sellers/service providers and rented real estate, before December 31 of the year in which the transactions were carried out.
2. Verify the reliability of the data (tax identification number, VAT number, etc.) and close the account of any user who, after two reminders, does not transmit the required information.

To do this, the platform operator can rely on:

3. Inform each seller or service provider — natural person — that their data may be communicated to the foreign tax authorities concerned.
4. Send a summary of the information to the sellers or service providers, within the same deadline as the declaration to the tax authorities.

The data is sent in an encrypted XML format, imposed by the tax authorities. It is therefore essential to have an adequate technical solution to extract, convert and secure this information (or to be supported by a specialized service provider).

III. Which vendors or suppliers are affected?

Operators must declare sellers or service providers who:

1. Have carried out at least one of the transactions in question (sale of goods, provision of personal services, rental of means of transport, rental of real estate),
2. Are residents of France, an EU Member State or a state/territory that has concluded an automatic exchange of information agreement with France, or have rented a property located in one of these states.

On the other hand, the following do not fall within the scope of reporting obligations:

• Public entities.
• Publicly traded entities and their related entities.
• Hotel operators or similar operators exceeding 2,000 real estate rental transactions with the same lot (during the reporting period).
• Occasional goods sellers (less than 30 sales of goods for a total of no more than €2,000).
• Entities linked to the platform operator.

IV. How long does it take to fulfill its obligation?

Platform operators must subscribe their declaration each year, no later than January 31 of the year N+1, for transactions carried out during the year N. Respecting this deadline is crucial to avoid any sanctions.

V. What are the penalties for non-compliance?

The DAC 7 legislation provides for a system of fixed fines. In France, the offending operator may be fined a maximum of €50,000, applicable for any breach of:

• To the obligation to report,
• To the duty of care (data collection and verification),
• The obligation to inform sellers or service providers about the data transmitted.

In addition, the tax authority may include the platform on the black list of non-cooperative operators. This penalty is modulated by a proportional scale taking into account the seriousness of the offence.

Higher sanctions may apply in the states of foreign operators.

VI. What is the objective of this regulation?

This regulation aims to strengthen fiscal transparency and cooperation between states, by facilitating the exchange of data on the activity of sellers/service providers operating via digital platforms, whether in the European Union or — in the medium term — all OECD countries.

Concretely, this information can be used to fight against tax evasion, in particular for direct taxes (income or corporate taxes), but also for VAT and even social security contributions (URSSAF in France).

VII. How to set up this system in a company?

1. Identify if your business is subject to DAC 7
   • Analyze your business model: do you connect sellers and buyers?
   • Check for any exclusions (payment only, simple referencing...).
2. Set up a data collection procedure
   • Update your onboarding processes (seller/service provider sheet),
   • Collect and keep supporting documents (tax number, proof of ownership for real estate rentals, etc.).
3. Create and maintain an audit log
   • Document the reliability of the information,
   • Be sure to update this log regularly to prove that the checks have taken place (within the last 36 months).
4. Proceed with an annual declaration
   • Audit the consistency of the data collected,
   • Verify that the register is complete and available,
   • Inform each user of the data transmitted to the authorities,
   • Submit the information in the required format (encrypted XML) by January 31 N+1 at the latest.
5. Anticipate the management of returns or controls
   • Set up a department or contact person dedicated to compliance,
   • Be prepared for questions from sellers/service providers about the management of their data,
   • Verify that your tool or technical partner knows how to manage the security and encryption of the files sent.

By following these steps, you secure your compliance with DAC 7 rules and reduce the risk of sanctions.

Our teams offer comprehensive support to help you comply with the reporting obligations imposed by the DAC 7 directive. In particular, our team is responsible for identifying the scope of application, setting up procedures for collecting and verifying data as well as formalizing the annual declaration to the tax authorities. Cyplom has already supported several major operators in these areas (see our offering).

Thanks to our expertise, you benefit from personalized follow-up to ensure the compliance of your platform with complete peace of mind.

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