By: Antria Aristodimou, PARTNER │ HEAD OF CORPORATE DEPARTMENT @ A. Karitzis & Associates LLC
Key Provisions of DAC 7 and the Reporting Obligations for Platform Operators in Cyprus
By virtue of the Law 105(I)/2023 amending the Law on Administrative Cooperation in the field of Taxation (Law 205(I)/2012), the provisions of the Council Directive (EU) 2021/514 of 22 March 2021 amending Directive 2011/16/EU on administrative cooperation in the field of taxation (the “DAC 7”), relating to the reporting obligations of the so-called ‘platform operators’, have been incorporated into the national legislation of the Republic of Cyprus. In particular, according to DAC 7, each and every ‘Reporting Platform Operator’ is under a series of obligations, the main of which are the following:
- Obligation for registration with the relevant registry kept by the competent authority of the Republic of Cyprus, being the Tax Department.
- Obligations relating to the procedure for due diligence.
- Obligation to submit a report with regards to each reporting period, namely calendar year (the “Reporting Period”) by the 31st of January of the year following the respective Reporting Period.
At first instance, however, it is important to identify whether a platform operator falls within the scope of DAC 7 and, thus, the relevant national legislation; the elements which must be satisfied for the purpose of having a platform operator considered an obliged ‘Reporting Platform Operator’ are the following:
- “Platform”: Any software, including a website or a part thereof and applications, including mobile applications, accessible by users and allowing Sellers to be connected to other users for the purpose of carrying out a Relevant Activity, directly or indirectly, to such users. It also includes any arrangement for the collection and payment of a Consideration in respect of Relevant Activity.
- “Platform Operator”: An Entity that contracts with Sellers to make available all or part of a Platform to such Sellers.
- “Relevant Activity”: An activity carried out for Consideration and being any of the following:
– the rental of immovable property, including both residential and commercial property, as well as any other immovable property and parking spaces;
- “Personal Service”, defined as a service involving time- or task-based work performed by one or more individuals, acting either independently or on behalf of an Entity, and which is carried out at the request of a user, either online or physically offline after having been facilitated via a Platform;
- the sale of goods; or
- the rental of any mode of transport.
- “Reporting Platform Operator”: Any Platform Operator, other than an Excluded Platform Operator, who is in any of the following situations:
- it is resident for tax purposes in a EU member state or, where such Platform Operator does not have a residence for tax purposes in EU member state, it fulfils any of the following conditions: (i) it is incorporated under the laws of a Member State; (ii) it has its place of management (including effective management) in an EU member state; (iii) it has a permanent establishment in an EU member state and is not a Qualified Non-Union Platform Operator.
- it is neither resident for tax purposes, nor incorporated or managed in an EU member state, nor has a permanent establishment in an EU member state, but facilitates the carrying out of a Relevant Activity by Reportable Sellers or a Relevant Activity involving the rental of immovable property located in an EU member state and is not a Qualified Non-Union Platform Operator.
On the other side, in order for an obliged ‘Reporting Platform Operator’ to assess which of the sellers trading on its Platform must included in the report to be submitted, the following elements must be checked:
- “Seller”: A Platform user, either an individual or an Entity, that is registered at any moment during the Reportable Period on the Platform and carries out a Relevant Activity
- “Active Seller”: Any Seller that either provides a Relevant Activity during the Reportable Period or is paid or credited consideration in connection with a Relevant Activity during the Reportable Period.
- “Reportable Seller”: Any Active Seller (not specifically excluded from the scope of DAC7) that is resident in a Member State or that rented out immovable property located in a Member State.
In light of the above, a ‘Reporting Platform Operator’ shall collect the following information with regards to each Seller (not specifically excluded under DAC7) so as to be in a position to -among others- assess whether such Seller is a ‘Reportable Seller’:
- the first and last name for individuals or the legal name for entities;
- the primary address;
- any Tax Identification Number (TIN) issued to that Seller, including each EU member state of issuance, and in the absence of a TIN, the place of birth of that Seller for individuals or the jurisdiction of incorporation for entities;
- the VAT identification number of that Seller, where available;
- the date of birth of that Seller for individuals or date of incorporation for entities; and
- in case of entities, the existence of any permanent establishment through which Relevant Activities are carried out in the EU, where available.
According to DAC7 a ‘Reporting Platform Operator’ must, then, submit to the Tax Department, being the competent authority in the Republic of Cyprus the following information with regards to each ‘Reportable Seller’:
- the first and last name for individuals or the legal name for entities;
- the primary address;
- any Tax Identification Number (TIN) issued to that Seller, including each EU member state of issuance, and in the absence of a TIN, the place of birth of that Seller for individuals or the jurisdiction of incorporation for entities;
- the VAT identification number of that Seller, where available;
- the date of birth of that Seller for individuals or date of incorporation for entities;
- in case of entities, the existence of any permanent establishment through which Relevant Activities are carried out in the EU, where available;
- the financial Account identifier, being unique identification reference number of the bank account or other similar payment services account to which the consideration (with regards to the provision of Relevant Activities) was / is paid or credited;
- the name of the holder of the financial account to which the consideration was / is paid or credited, if different from that of the holder of the financial account identifier;
- each Member State in which the Reportable Seller is resident;
- the total consideration paid or credited during each quarter of the Reporting Period and the number of Relevant Activities in respect of which the said consideration was paid or credited; and
- any fees, commissions or taxes withheld or charged by the Reporting Platform Operator during each quarter of the Reporting Period.
The overall purpose of DAC7 is to establish a common mechanism for securing the cooperation between the competent tax authorities of the EU member states as well as for facilitating the exchange of information between the EU member states for tax purposes. That said, compliance with the obligations imposed by DAC7 to obliged ‘Reporting Platform Operators’ is imperative in order, on the one side to ensure the implementation of DAC7 mechanism and, on the other side, avoid the consequences, penalties and/or other measures to be imposed by the competent authority in the Republic of Cyprus in case of failure of the Reporting Platform Operator to abide with its obligations.
