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Transparency in the sharing economy

Author: David Wren and Stephen Dale

Published: 06 Dec 2021

Transparency in the sharing economy article image

Digital platforms allow the enterprising to sell their goods, services, skills and assets. However, they are also a rich source of data for tax authorities. EY’s David Wren and indirect tax expert Stephen Dale explain.

Tax authorities have long had powers to request data from third parties to check or challenge tax filings. However, requesting the right data takes time, expertise and insights into the data holders. That’s one of the reasons why automatic exchange of information (AEOI) can be so attractive.

From 2023, digital platforms operating in the EU will be brought into the AEOI world and required to provide information on sellers directly to tax authorities. The rules create a reporting obligation for any digital platform that links buyers and sellers in one of four areas: the rental of immovable property, personal services, rental of transport or the sale of goods. The AEOI rules may also capture platforms that provide services as an ancillary activity – for example, a fintech company that provides access to financial advisers, or a comparison website that provides access to lawyers, debt advisers or other professionals.

Parallel changes to the EU’s VAT rules are broader, covering all supplies of goods and services ‘facilitated’ by a platform. The EU’s e-commerce package has applied since 1 July 2021 to platforms established in any part of the world where the place of supply of the goods/services is within the EU. The rules require platforms to provide data on request, on a member state by member state basis.

However, VAT data still has to be requested by the tax authorities in most cases – a pull request submitted by the tax authority. AEOI is the opposite: data is pushed to the tax authority by organisations, which are also required to determine whether they are in scope in the first place.

This article looks at requirements across the EU and the UK, and the wider global initiatives for the provision of data led by the Organisation for Economic Cooperation and Development (OECD). It also looks at the parallels between AEOI and enhanced VAT reporting requirements, and key points affected platforms (and sellers) should be aware of.

Overview of the AEOI requirements

These rules are being introduced in the UK and the EU from 1 January 2023, and more broadly to other territories under the proposed OECD model. Analogous rules are also being introduced in the US from 1 January 2022 under expanded 1099-K reporting provisions.


Tax authorities

  • Collect data about sellers on their platform 
  • Verify sellers’ information for accuracy
  • Report to tax authorities annually by 31 January
  • Re-validate seller information periodically and after a change of circumstances
  • Provide the information to sellers to help them complete tax returns
  • Exchange the information received with the tax authorities where the sellers are registered (or where rental property is located)
  • Use the information to ensure sellers are complying with their tax obligations
  • Enforce the rules and ensure that platforms are operating them correctly

While these rules are new to digital platforms, they are based heavily on the common reporting standard (CRS) rules applying to bank accounts and other financial services.

Changes in the EU: DAC7

The EU has adopted the new requirements through an amendment to its Directive on Administrative Cooperation (DAC). This sixth amendment to the original Directive sits alongside the CRS for financial services (DAC2), exchange of tax rulings (DAC3), country-by-country reporting (DAC4), exchange of beneficial ownership (DAC5) and the mandatory disclosure regime (DAC6).

Member states will be required to transpose DAC7 into local law by 31 December 2022 to allow digital platforms to start collecting and verifying information from sellers on 1 January 2023. The first reports will be due by 31 January 2024.

In parallel, providers of electronic interfaces that facilitate transactions with a place of supply in the EU are already required to collect similar, but not identical, information from sellers. This applies whether the platform is liable for the VAT on the underlying transaction or otherwise. The current reporting provisions are expected to be further extended as part of the VAT in the Digital Age project, with legislative proposals (possibly a data push model) being made by the Commission in the second half of 2022, following a detailed public consultation this year.

For payment service providers (PSPs), the EU’s VAT Directive is modified from 1 January 2024 (as well as the Regulation on administrative cooperation) such that PSPs will be required to provide transaction-level data (push) of cross-border payments they process.

DAC7 is unlikely to be the final amendment to the DAC. The EU is expected to publish DAC8 in early 2022, bringing into scope reporting on cryptocurrency and e-money. Between them, DAC7 and DAC8 will bring a large part of the digital economy within the scope of AEOI.

Several EU member states have introduced their own national rules with a global reach (see the example for France, below). These must be considered in addition to the EU and global provisions.

Reporting in France

Since 1 January 2019, internet platform operators bringing parties together for the purpose of the sale of a good, the provision of a service or the exchange or sharing of a good or a service in France must comply with reporting and information obligations to their users and the French tax administration, regardless of the platform’s place of establishment.

Platform operators are required to:

  • inform their users, at the time of each transaction, of the financial (taxation) and social obligations incumbent on persons carrying out commercial transactions through the intervention of the platform; and
  • provide the users with an electronic link to the tax administration’s websites, for taxpayers to declare revenues within the scope of French tax.

In addition, the platform must send electronically to their users and to the tax authorities, by 31 January at the latest, a summary of the transactions carried out in the prior year.

The French government has not yet indicated whether its legislation will be adapted to alleviate the reporting obligations that will fall on platforms as a result of DAC7. However, the legislation will have to be enhanced where it currently falls short of the DAC7 requirements (eg, thresholds).

OECD: model rules for platform operators

The OECD has published both Model Rules for Reporting by Platform Operators and an International Exchange Framework in the form of a multilateral competent authority agreement to be signed by adopting jurisdictions.

The OECD rules and the EU’s DAC7 are designed to ‘jigsaw’ together to avoid double reporting by digital platforms. Platforms in jurisdictions adopting the OECD rules can be exempted from the requirement to report for AEOI purposes (but not VAT) in the EU, and vice versa.

The OECD framework contains a series of options that adopting jurisdictions may consider – including the extension of rules to the sale of goods, the inclusion of bank account information and other data elements. A jurisdiction adopting all the OECD’s options is effectively adopting DAC7, and should find that the regimes are fully compatible (at least in theory if not in practice).

Further meetings of the OECD are expected to define the list of adopting countries and the timeline for adoption. Like the EU, the OECD is expected to publish rules in early 2022 bringing into scope cryptocurrency and potentially e-money, and it is likely that further updates on the adoption of these rules could be released at the same time.

The OECD has also developed the guidelines The Role of Digital Platforms in the Collection of VAT/GST on Online Sales. The guidelines propose a number of options whereby the role of platforms in the collection of VAT/GST could extend from education and enhanced reporting requirements, through to making platforms liable for the total amount of VAT/GST due on the underlying transactions.

The UK consultation

The UK is the first country to publicly consult on domestic implementation of the AEOI rules (see Reporting rules for digital platforms). The approach that has been adopted by HM Treasury seeks to ‘bridge the gap’ between the EU rules and the OECD framework, notably by taking advantage of the optionality presented in the OECD framework and including the sale of goods and various data elements required by DAC7.

Although it is unlikely the UK will deviate significantly from the OECD model rules, HMRC’s exchange of information policy team has consulted widely with industry and has published substantial guidance for previous AEOI regimes. The team has taken an active role in discussions about the adoption of the rules, clarifications of uncertain items during implementation, discussions on XML schemas and methods of exchange, and in discussions on tax authority review of compliance. Many countries globally have looked to UK guidance on AEOI when framing their own rules.

The consultation acknowledges that the timing of the provision of revenue data does not fit with the UK’s income tax self assessment deadline. Therefore, the primary use of these sales-level data is likely to be limited to identifying the existence of income sources rather than pre-population of tax returns.

What can platforms be doing now?

The implementation of these rules will create operational readiness challenges, notably around the collection of information from 1 January 2023 and reporting in January 2024 for AEOI and immediately for transactions within the scope of the EU’s new VAT rules. Typically, implementation programmes on this scale can take 12-18 months to deliver from finalisation of the domestic rules to the go-live of technology changes. There is a need for tax authorities to quickly finalise the AEOI rules, so that businesses can start on implementation.

There is also a range of non-tax issues to be addressed, from data quality to customer communications and, inevitably, data protection and legal issues.

The adoption of previous AEOI regimes, notably CRS (DAC2) and mandatory disclosure rules (DAC6) have had fractured implementations, with different rules in each jurisdiction and different reporting requirements, causing a significant extra compliance burden for organisations. Digital platforms will want early engagement with tax authorities in order to drive a consistent and coordinated approach.

Moving to VAT, while the EU VAT Directive sets out details of the data to be made available and effectively retained for 11 years, there is no indication as to the format to be used, nor the means of transmission should data be requested. It is anticipated that the VAT in the Digital Age project will provide a clearer framework within which this data must be provided, and arrangements put into place such that the data provided to one member state can be deemed to be supplied to all 27 (a one-stop shop perhaps?).


The expansion of the DAC and OECD rules to apply to digital platforms represents a substantial enlargement of AEOI. Tax authorities will undoubtedly view new data, together with VAT information, as powerful tools with which to tackle the tax gap.

For the digital platforms affected, there is a substantial compliance exercise now for VAT purposes and further in 2022 for AEOI. Businesses need to be aware of the consequences of non-compliance in terms of penalties and de-listing of non-cooperative users.

Even those not affected by these rules should not sit too comfortably. DAC9 covering the mutual communication of (among others) the revenues of high net worth individuals has been mooted and the EU’s VAT in the Digital Age project will potentially extend the real-time reporting (and e-invoicing) obligations falling on relevant businesses wherever they are located.

AEOI imposes a substantial burden on industry, turning digital platforms from business enablers into tax authorities’ delegated enforcers. There is a need for governments to demonstrate that bulk data collection is capable of delivering meaningful results – both the European Court of Auditors and the European Parliament have said as much for the existing DACs. But for now, tax authorities are no longer scared of large volumes of information and, as confidence with analytics and machine learning grows, it will only add to tax authorities’ insatiable hunger for data.

About the author

David Wren, Associate Partner, Financial Services, EY, and Stephen Dale FCA, indirect tax expert and member of the Tax Faculty’s VAT and Duties Committee