From January, operators of digital platforms, i.e. virtual marketplaces where people and companies offer their goods or services, are obliged to register with the tax authority and start collecting data about the sales they facilitate on their platforms. The deadline for registration was 3 April. The amendment to the law on international cooperation in tax administration aims to prevent tax evasion, improve tax assessment and cooperation between EU Member States on the taxation of platforms operating in several countries at the same time. Leading digital platforms include Airbnb, Bolt, Liftago and Uber, but the amendment will also affect smaller ones. In addition, thousands of people and companies who use the platforms as sellers are also affected.
The adopted amendment, effective from 1 January 2023, is based on the European Union's desire for greater control over the new type of business represented by digital platforms. Until now, they have often been outside the legal framework of the Member States and there has been uncertainty about the correct payment of taxes. The new legislation introduced in the Czech Republic and in other Member States through the DAC 7 Directive obliges digital platforms to provide more information. This particularly concerns the income of individual sellers who offer their goods or services through the platforms.
To log in, operators of digital platforms must fill in an online form, which can be found on the My Taxes portal under the Financial Administration of the Czech Republic. In this form, besides its identification data and data on the websites it operates, the platform operator is required to fill in the EU Member States in which the sellers using these websites are resident. Failure to comply with the reporting obligation may result in a fine of up to one and a half million crowns.
The reporting obligation does not apply to websites or mobile applications that passively provide information about goods or services or properties for rent and thus function only as a kind of bulletin board, where physical contact between the seller and the customer is necessary for the transaction and the related payment. The reporting obligation also does not apply to sales which do not exceed the statutory threshold of significance in terms of volume.
Obligation to provide information applies both to platforms and the sellers themselves
In addition to reporting, operators of digital platforms are obliged to submit information on sales made through the platform by individual sellers by the end of January of the following year. Thus, for the first time, the obligation to provide a report to the Specialised Tax Authority falls on 31 January 2024 for the 2023 period.
Sellers whose sales will be notified via the platform include both non-business natural persons and legal entities, as well as unincorporated entities such as associations and trusts. The obligation to report sales will require good cooperation between the seller and the platform operator. If a seller fails to provide the necessary cooperation to the platform operator, the platform operator will be entitled to close the seller's account on the platform and prevent the seller from re-registering or to not pay the seller any consideration.
It can be assumed that the reporting obligation will place increased demands on the existing reporting reports of platform operators. Platform operators should therefore set up their information systems in time to be able to comply with the reporting obligation in terms of the required structure of the data they will be required to submit to the tax authority. The tax authority will be entitled to provide information obtained from platform operators to foreign tax authorities in the framework of regular international exchange of information.
The purpose is to tax the income from the digital economy fairly
The new obligation for platform operators was introduced not only to obtain information on the income of non-business individuals made through online marketplaces and thus streamline the random checks carried out on selected platforms, such as checks focused on short-term rentals of real estate. The information obtained can be used for the purposes of fair taxation of income from the digital economy, which is being discussed in the OECD field under the so-called Pillar 1. This is a new concept of taxation, where the digital economy is not the physical presence of the seller in the target market that is important for the right to be taxed, but the value of sales achieved in the target market.
In practice, such a situation can be illustrated by a multinational group of companies using the digital economy, in which one of the companies operates a platform through which another company offers its products to a target market where the group has no physical presence. The OECD's aim is to achieve a uniform approach that could lead to a higher level of taxation of the group of digital economy companies in the countries where they offer their products.
In the context of multinational groups of companies, the Czech tax authority may in the future focus its attention on the method of determining the amount of remuneration of the Czech platform operator, rather than on the taxation of the income of foreign sellers as group users of the digital platform, especially where the development of such a platform required significant initial investments.