New sales tax on online platforms

Piotr Kłodziński|
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Do you sell items on online platforms or offer real estate for rent on such platforms? From January 1, 2023, you can pay tax on this!

 

The new law heralds the end of free earning on the Internet without paying tax. From January 1, 2023, popular online platforms enabling the sale of various items or rental of real estate will be able to, and even have to, cooperate with national tax authorities.


Directive 2021/514, i.e. DAC 7

All this is due to the Directive of the Council of the European Union of 22 March 2021 on administrative cooperation in matters of taxation. It obliges Member States to adopt, by December 31 this year, appropriate regulations that will specify the cooperation of administrative authorities, mainly those dealing with taxes, with the so-called holders of digital platforms. As you can read in the justification for the directive itself: 

“Recent years have seen a rapid digital transformation of the economy. This results in an increasing number of complex situations involving tax fraud, tax evasion and tax avoidance. The cross-border dimension of services offered through the use of platform operators has created a complex environment in which tax enforcement and compliance can be challenging. There is a lack of tax compliance and the amount of undeclared income is significant. Member States' tax administrations do not have sufficient information to properly assess and control the gross income generated in their country from commercial activities carried out via digital platforms. This is particularly problematic if the income or tax base passes through digital platforms established in another jurisdiction.

In order to prevent tax fraud, tax evasion and tax avoidance, commercial reporting should cover the rental of real estate, personally provided services, the sale of goods and the rental of all means of transport.

Therefore, the very idea of the directive is based, as it were, on tax control in the broad environment of broadly understood trade on online platforms. Unfortunately, this may have worse consequences for ordinary consumers who want to sell, for example, unused clothes than for entrepreneurs who treat such platforms as another tool to reach potential customers and pay tax on the income obtained anyway. The general assumptions of this directive will be described on the basis of its content itself, as well as the assumptions of the Ministry of Finance addressed to owners of digital platforms.

 

What is an online platform?

According to the directive, an online platform is:

"any software, including a website or part thereof, and any applications, including mobile applications, which are available to users and which enable 'Sellers' to communicate with other users to perform a 'relevant activity', directly or indirectly, for such users. "The term also includes any arrangements for the collection and payment of 'remuneration' for a 'relevant activity'." Therefore, these are all commonly popular applications, websites, portals that offer posting advertisements regarding items, real estate, or even job offers, after setting up a user account.

 

The definition of the platform itself introduces further concepts that are not too obvious, such as "appropriate activity". According to the definition of this concept, it is this one of the following actions is performed for remuneration, and so:

  1. rental of real estate or parking spaces;
  2. service provided in person – in other words, work performed on time or in a task-oriented manner, not only "offline" at the workplace, but also online;
  3. sale of goods;
  4. rental of a means of transport.

Therefore, the activities for which the platform user receives remuneration (in any form!) will determine whether data about the transactions we conduct will be transferred to tax authorities in order to "collect" tax from sellers.

 

What data will be transferred to tax authorities?

Online platforms are intended to provide tax authorities, and more precisely to the Head of the National Tax Administration, by January 31st with information about sellers subject to reporting, i.e. those who derive financial benefits from the activities specified above. But what data will be transferred there? It also depends on whether we sell on the platform consumer Whether seller. Currently, platforms already introduce an obligation for users to certify whether items are sold privately or by an entrepreneur - such an obligation is introduced by another Directive of the European Parliament and of the Council of the European Union - 2019/2162, where the justification reads:

 

“Online marketplace providers should inform consumers about whether a third party is offering goods, services or digital content is an entrepreneur or an entity that is not an entrepreneur, on the basis of a declaration submitted to them by a third party. Where a third party offering goods, services or digital content declares that it is a non-trader, online marketplace providers should include a short statement to the effect that consumer rights under EU consumer protection law do not apply to the concluded contract."

 

Such regulation, as intended by the 2019 directive, is intended to help protect consumers participating in virtually global commercial relations via the Internet, but now it will also serve another purpose - sellers, after determining their position as a consumer or entrepreneur, will be obliged to provide online platforms with different data, and thus it will make it easier for tax authorities to distinguish different entities.

This is the list of data that the online platform operator will undertake to provide to tax authorities:

 

Physical people

  1. name and surname, main address, date of birth
  2. each Tax Identification Number issued and each participating country of issue and, failing this, the seller's place of birth
  3. VAT identification number, if available
  4. financial account identifier, if provided; if the seller's name and surname are different from the account holder's details, this aspect is also to be recorded
  5. country of tax residence of the seller
  6. the total remuneration paid or credited and the number of relevant activities performed
  7. information about deposits, commissions or taxes withheld or collected by the platform operator
Legal persons, organizational units without legal personality and legal arrangements

  1. name, main address, number in the economic register
  2. each TIN issued and each participating country of issue
  3. VAT identification number, if available
  4. information on the existence of a possible permanent establishment
  5. financial account identifier, if provided; if the seller's name and surname are different from the account holder's details, this aspect is also to be recorded
  6. country of tax residence of the seller
  7. the total remuneration paid or credited and the number of relevant activities performed
  8. information about deposits, commissions or taxes withheld or collected by the platform operator

 

Additional information must be provided when the seller offers to rent the property, and these include:

  1. address of each rental object group, where rental object group means all properties located at the same street address that are owned by the same person and that are offered for rent on the platform by the same seller;
  2. the number of the entry or entries in the land and mortgage register, if such a number was assigned, or its equivalent;
  3. the total consideration paid or credited and the number of relevant activities in respect of each group of tenancies;
  4. the number of days the property was rented;
  5. the type of each property being rented.

Interestingly, the concept of 'appropriate activity' does not cover activities undertaken by the platform's employees or entities associated with it.

The provisions of the directive also include regulations regarding closing the seller's account and preventing him from re-registering or withholding payment of the remuneration due to him. When is this option updated? If the seller does not voluntarily provide the information referred to above within 60 days of the first inquiry from the platform operator. Will such a regulation be included in Polish regulations? We don't know this yet, but in order to somehow "transfer" responsibility from platforms to users, such a provision may appear in the draft and later in the adopted act. In the very assumptions of the Ministry of Finance, you can find solutions that somehow bypass the voluntary provision of data by users. Obtaining data about the seller will be possible, among others, through the "identification service" made available by the state - i.e. using EPUAP, KRS or CEIDG.

 

Are online platforms also subject to new obligations?

The directive itself also imposes an obligation to register online platforms one-time in a selected Member State, where an individual platform number will be assigned. This is to make it easier to identify the platform on which a given seller earns his earnings. In addition, the platform must comply with information obligations and comply with the recommendations of authorities, as well as submit to inspections regarding the application of due diligence procedures and reporting obligations regarding platform sellers. If the reporting obligation is not fulfilled or is fulfilled incompletely, the platform will be requested to fulfill this obligation within the deadline. 30 days from receiving the call. After this deadline, the authority may repeat the request, specifying the same deadline. The term "due diligence" itself is not defined in the text of the directive, but based on the overall picture, it should be concluded that this is how the diligent provision of information regarding sellers to the appropriate authorities is defined. 

 

Possible sanctions for online platform operators

The assumptions of the Ministry of Finance provide for quite severe sanctions for online platforms for lack of appropriate cooperation with tax authorities. For registering but failing to fulfill reporting obligations and ceasing to provide information to the Head of the National Tax Administration, the platform may have its individual number withdrawn. The re-assignment of the identifier may take place when the platform has previously been issued will make a cash deposit to the account of the authority in the amount of as much as a million zlotys!

The next sanction, and perhaps the most severe, is: deletion from the register as a VAT payer. This may be the result of a platform failing to comply with the obligation to register once in a selected Member State. There is an alternative here as well cash penalty, the amount of which is balanced by the amount one hundred thousand zlotys up to five million! The same fine may be imposed for failure to comply with the obligation to apply due diligence principles and procedures, including the collection of documentation.

What could such pressure caused by criminal laws mean? Most likely, very effective cooperation with tax authorities. This means serious financial problems for many sellers on platforms, including the smallest ones, who may still be unaware of the specter of paying tax in 2023. 

At the time of publication of the article, there is no draft law that would implement the provisions of the EU directive, however, such an obligation rests with Poland, and the deadline for its implementation is December 31, 2022

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