DAC7: Luxembourg legislates for digital platforms’ sales reporting

The proposed new legislation was approved unanimously by all 60 members of the Chambre des Députés, Luxembourg’s parliament, on Wednesday 3 May. The law makers are seeking an exemption from a constitutional requirement to hold a second vote on the proposals, which, if granted, would allow the proposals to be adopted into Luxembourg law faster.

The purpose of the draft law is to transpose an EU directive known as ‘DAC 7’ that was finalised in 2021. The directive promotes cooperation between tax authorities and extends tax transparency rules to platform operators. It itself is based on platform reporting rules drawn up by the OECD in 2020.

The obligation to report arises in relation to sellers that derive an income from sale of goods, renting immovable property or modes of transport, or providing personal services, though there are exceptions relating to the sellers’ information to be reported and the activities triggering the reporting duties.

Tax adviser Stephanie Raffini of Pinsent Masons in Luxembourg said: “The purpose of the law is to assess and monitor gross revenues generated through digital platforms, as the cross-border dimension of the services offered by these platform operators makes the application of tax rules more difficult.”

“A standardised reporting obligation for platform operators is introduced, in order to collect data relating to providers active on digital platforms and their services. These data are then exchanged automatically and compulsorily between member states. The draft law defines the due diligence, registration and reporting obligations incumbent on platform operators in Luxembourg and determines the modalities for the automatic exchange of information declared and relating to non-resident sellers with the tax authorities of other EU member states. Deadlines for reporting and sanctions are also provided for in the draft law,” she said.

In addition, the draft Bill also further clarifies the concept of “foreseeable relevance” in relation to the exchange of information upon request, as set out in Luxembourg and EU law on administrative cooperation in the field of taxation. The exchange of information provided for under that legislation is triggered where the information at issue has foreseeable relevance to the administration or enforcement of taxes.

Luxembourg already exchanges information with tax authorities concerning employment income, directors' fees and pensions. A proposed new EU tax transparency directive, DAC 8, would further extend reporting obligations in relation to e-money and cryptoassets.