The first DAC7 reporting campaign concluded in France on January 31, 2024. However, it was not without its challenges, and several operators encountered difficulties during the process.
A Technical Challenge: Filing the Report
Based on our field experience, we’ve observed that IT constraints regarding file format (requiring taxpayers to submit a compressed .XML file in gzip format) and the method required to encrypt the file have led to challenges in meeting reporting obligations. The French tax authorities’ portal has generated several anomaly messages in response to report filings, contributing to the chaotic nature of the process for taxpayers.
As a reminder, among other things, platform operators are required to:
- file with the French tax authorities an annual report relating to transactions carried-out by sellers and service providers through its intermediary. This report, due by January 31, 2024, covered the calendar year 2023, marking the first year of DAC7 implementation in the EU, including France.
- provide each seller or service provider with the information pertaining to them that have been transmitted to the French tax authorities.
The operators who “tested” this reporting procedure well in advance of the January 31 deadline were well advised: they ultimately managed to meet the deadline.
However, the unfortunate operators who began this reporting procedure late were consequently unable to file a final report approved as receivable by the French Tax Authorities in time. Despite their tardiness, these platforms were nevertheless able to benefit from the French tax authorities’ flexibility, which did not hesitate to grant additional time to operators who expressed their difficulties. Ultimately, these platforms are de facto forced to wait because the DAC7 portal of the French tax authorities is now closed until April 2nd.
A System of Penalties Allowing for Gradual Application
Consequently, platform operators encountering difficulties in meeting their reporting obligations on time, or those who have missed the deadline altogether, should be granted relief.
The question of the penalties for those latecomers warrants consideration. According to the regulation, platforme operators who voluntarily submit the report before any request or formal notice from the French tax authorities are not subject to penalties. Given the fact that the reporting portal remains closed and considering the technical issues encountered by some operators, it would be reasonable for the French tax authorities to suspend all requirements on this issue. At least, this is our wish.
Therefore, platform operators that have experienced difficulties in complying with their reporting obligations in due-time, or that have simply missed the reporting, should benefit from a relief.
A Reporting System that Still Lacks Clarity
Based on our field experience, DAC7 implementation in France rises two main issues.
First, the technical difficulties, linked to IT considerations shared in a 139-pages specification (!), whose complexity exceeds that of the most complex Articles of the French tax code. In addition, the obligation to produce a summary file that the operator is required to send to each seller or service provider covered by the DAC7 report is not necessarily easy to implement from a practical point of view.
However, the difficulties are also related to the scope and content of these obligations.
- Territoriality rules are not always very clear and raise doubts, in particular about the scope of the obligations borne by platform operators that are not established in the European Union
- A lack of precision related to the information to be reported (for example, the notion of fees and commissions withheld by the operator and the impossibility to report negative amounts in the event of discounts or rebates depending on the quarter)
- Uncertainties related to the modalities of implementation of due diligence for the purposes of identifying service suppliers/good sellers and collecting their information (e.g., prior information procedures for service suppliers/good sellers, need to update the terms and conditions of use of the platform to include references to information collection and sharing mechanisms, etc.)
In summary, the implementation of DAC7 rules in France is still in its early stages and the running-in period is marked by substantive or technical barriers that have yet to be fully addressed. Deloitte teams, combining a wide-range of tax and IT experts, have encountered and navigated these challenges adeptly. We stand ready to support platform operators that remain liable for their obligations.
