Statement on the Amendment to the Reporting Requirements for Digital Platforms (DAC7)

The VIR, as the Association for Digital Tourism, hereby submits the following comments on the draft bill for a law implementing Council Directive (EU) 2021/514 of March 22, 2021, amending Directive 2011/16/EU on administrative cooperation in the field of taxation and modernizing tax procedural law.

First and foremost, it should be noted that the draft bill will impose a significant compliance burden on the business community, and the simplification measures proposed in the draft will not result in any real reduction in workload, as will be explained in greater detail in the following comments. In addition, under Section 17, companies will have to incur significant effort to obtain and manage data from providers in accordance with this law. They will be forced to introduce additional new ongoing processes. Furthermore, pursuant to Section 19, this data must be reviewed and confirmed every three years. Contractual relationships with providers—whether through individual contracts or general terms and conditions—will also need to be significantly modified to ensure legal certainty for platform operators.

In principle, the VIR advocates aligning the proposed legislation closely with the provisions of the EU directive. Given the enormous increase in bureaucracy for companies, particularly those operating across Europe, deviating from the directive’s requirements imposes an additional burden that also carries the risk of legal uncertainty. This applies in particular to the uniformity of registration and reporting obligations, as well as the content, scope, and procedures for the information subject to reporting.

Since the first report is scheduled to be submitted as early as January 31, 2024, the implementation timeline is very tight, as all data collection and IT adjustments must be completed by 2023. This is made all the more difficult by the fact that no definition of the interface has been established yet.

The following points are discussed in detail:

§3 Platform: Reporting platform operators

1. Does the platform also apply to technical service providers?

The current definition of platforms could be interpreted to mean that technical service providers such as GDSs (General Distribution Systems)—e.g., Amadeus and Travelport—as well as traffic providers are also covered here in certain product areas.

In the B2B sector, for example, these systems connect hotels with sales platforms by presenting products from various providers for selection, checking availability, and processing bookings, thereby also confirming whether a booking has been made. Such systems also use the internet to bring individual companies together.

Since the draft bill’s stated aim was certainly not to bring these systems within its scope, clarification is needed here. Otherwise, any computer-based booking software in the tourism industry would, by definition, be considered an affected platform company. However, these booking systems, which have been in use since the 1980s, should hardly need to be subject to further regulation. The same question arises with regard to systems in the hotel industry. Is the operator of a hotel that is a franchisee of a hotel chain also a provider?

2. The Problem of Underbooking in the Tourism Industry

In the tourism industry, it is common for platforms to make products sourced from one another available. This can also occur across multiple platforms in sequence. The current draft does not clearly address how this should be handled. However, this is important to avoid double or triple reporting, since the service provider generates revenue only once, even though the booking may go through, for example, three platforms.

For example, a customer might book a product (a hotel room) on a booking site (A) that the provider (B)—who also operates a booking site—received from a company (C) for distribution, and which the provider obtained from the hotelier. The end customer may not be aware of these relationships—so which company should report this? All companies involved? Or just the hotel’s partner? Clarity is needed here.

It would be important to receive further clarification on this point in the explanatory notes (the example on pages 44 and 45 does not help so far). One possibility could be that platforms that thereby become providers are then reported as providers by the platform on which the booking takes place, rather than the service provider. The final platform in the chain would then report the revenue of the actual service provider (user) accordingly, thereby ensuring that the objective of this regulation is achieved.

3. Exemption for more than 2,000 cases involving relevant activities related to real estate units

The approach here was to simplify matters, as it can be assumed that companies of this size are already subject to rigorous scrutiny. For the platforms, however, this still means that all data must be collected for these companies as well. The pandemic has shown us that there can be events that lead to a complete market failure. This could result in large companies falling below these thresholds in such an extraordinary year.

Furthermore, it is unclear how companies that are part of a corporate group or are franchisees will be treated. It may be that Hotel Chain A generates more than 2,000 business transactions, but not every hotel operating under the brand, as they are legally independent entities.

As a result, all platforms must always collect all possible reportable data from all users, and only when submitting their annual report do they include or exclude this data from the report. This does not simplify the process.

§11 Registration in conjunction with §12 Reporting Requirement

1. Companies operating in multiple EU countries

Under Section 11, companies may choose in which EU country to register, and under Section 12, they may also submit a single report containing the information required under Section 13 in one EU country.

However, it is not yet clear whether all EU countries actually require the same data (e.g., the method of identifying the objects) and, if so, whether the portal will need to correct data from certain countries because a country’s interface does not provide for this information at all. It is also unclear how inquiries regarding a single report from different countries will be handled in practice.

In our view, a single EU-wide registration and reporting requirement for platforms remains the only truly effective way to simplify processes for all parties. Individual countries could then access this system, and the procedure would indeed be uniform.

§13 Information Subject to Disclosure

1. Definition of the Reporting Period

In the tourism industry (and particularly in the vacation rental sector), there can be significant gaps of time between booking and arrival (sometimes as long as a year). For this reason, it is unclear for what time period the platform is required to report certain metrics. There are also models in which deposits are required at the time of booking and the remaining balance must be paid upon arrival. Furthermore, due to the long time between booking and arrival, transactions can be canceled.

It would certainly be a clearer solution for the tourism industry to report the applicable fees and other amounts (such as fees withheld or collected, commissions, or taxes) either by booking date or by departure date (which, in our opinion, would be the best option).

It should also be clarified that the information subject to disclosure under § 13 of the Draft Act is subject to the protection of trade and business secrets under § 6 of the Freedom of Information Act. In particular, with regard to disclosure requirements concerning the number of reportable activities and the associated remuneration received (Section 13(2)(9)-(11) of the Draft Act), this involves sensitive business information that is subject to financial confidentiality obligations, particularly in the case of companies operating internationally.

§14 Reporting Procedure

1. Interface/Data Set

The draft states: “The Federal Ministry of Finance publishes the officially prescribed data set in the Federal Tax Gazette.”

It is important that this dataset be made available to companies as soon as possible. The structure of this dataset has far-reaching implications, including the design of the front-end data collection interfaces for the providers, which the platforms must make available. Since this still needs to be programmed and tested, companies need sufficient lead time.

We also recommend finding testing companies with which this interface can be tested for data transmission. We anticipate that significant amounts of data will be transmitted by individual companies.

§17 Review of Information Subject to Disclosure Requirements

1. Portals’ Duty to Cooperate, Section 17(3)

Through this regulation, the portals are effectively performing a function that is normally the responsibility of the state. The regulation also specifies which data must be provided and establishes plausibility checks for the reported data. With this information, each tax office should be able to conduct its own independent review of individual providers.

Section 17(3) therefore goes well beyond its intended purpose, because if it is assumed that this information is incorrect, the portal effectively becomes an external auditor for the tax authority. A tax authority must be capable of obtaining the additional information and conducting the necessary research on its own. The basic information required for this purpose has already been established by law and provided by the business community.