The Ambiguity of DAC7 Implementation and the “Comprehensive FAQ” in Belgium: A Prelude to Litigation for Digital Platforms?
22 Dec 2023
Earlier this month, the text of the draft law containing various fiscal provisions (Chamber 2023-2024, no. 55/3714/001, art. 56) has been adopted by the committee. The adopted draft law foresees in the insertion of a new Article 315 quinquies in the Income Tax Code of 1992 (ITC92), which stipulates that platform operators must, at the administration's request and without physically moving, provide all information and documents necessary to verify the compliance with certain obligations and conditions.
Moreover, not only the legislator, but also the Tax Administration seeks to clarify matters regarding the obligations of operators of digital platforms. In that regard, the Belgian Tax Administration has recently published an updated version of the FAQ.
Nevertheless, a lot of uncertainty regarding the obligations remains. Uncertainty that will most certainly lead to long and technical litigation. Below we will discuss a selection of this prelude of litigation.
Retention period of the books and documents
In adherence to the due diligence procedures and reporting obligations, a reporting platform is mandated to maintain an electronically searchable register. This register is a comprehensive record of all actions undertaken and all information utilized in the execution of the due diligence procedures, as well as its reporting responsibilities to the Belgian competent authority.
The purpose of these registers is to provide a transparent mechanism for the Belgian competent authority to ascertain whether the platform operator has fulfilled its due diligence obligations. It also serves to verify that the operator has employed all accessible resources to procure accurate information about the sellers operating on its platform.
Furthermore, these registers, inclusive of all underlying information, are required to be preserved for the fiscal retention period applicable to books and documents. This period has recently been extended to a duration of 10 years. However, it is noteworthy that data pertaining to excluded sellers necessitates a retention period of only 36 months.
However, in case of a dispute, these data are kept after this period if necessary.
The foregoing is unclear: should really all information be kept? In what form? Is this proportionate? One can raise the question if the above practice might not lead to a possible GDPR violation. That being said, when retaining the data during the statutory period, data controller shall have to comply with GDPR requirements such as data minimisation, confidentiality. Hence the data cannot be pseudonymised and archived, data that is manifestly not relevant for the dispute should also not be kept longer than the initial purpose permits.
Sanctions
Non-compliance with regulations can result in significant fines for both EU- and non-EU platform operators and sellers. The fines increase with each subsequent violation and can lead to a ban on offering services in Belgium for non-EU operators. If the platform would not file a declaration in any country, in principle each of the 27 EU member states can impose a sanction (FAQ 12.2, p. 52).
There are also specific fines for not providing timely or complete information, with higher penalties for fraudulent intent. However, the balance of these fines is questionable.
Not only unwilling platform operators but also sellers can incur a sanction if they do not provide the required information and after being notified twice. In that case, the platform operator must close the seller’s account and prevent them from re-registering.
In conclusion
Digital platforms are currently preparing for the first reporting and are refining their due diligence procedures in line with DAC7 (following DAC7 light earlier). The updated FAQ provides some welcome guidance in this regard but, at the same time, raises some additional questions.
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