How does the EU’s DAC 7 affect Israeli website operators?

Israeli and other non-EU platform operators covering the EU are supposed to report under DAC 7.

Israel Start up (photo credit: INGIMAGE)
Israel Start up
(photo credit: INGIMAGE)

At the beginning of 2023, the EU implemented new reporting rules in EU Directive DAC 7 for digital platform operators everywhere, including, potentially, Israel. The EU has around 450 million affluent consumers in 27 countries. Here is an overview of DAC 7:

Which platforms? 

A platform is broadly defined and includes any software, such as a website and applications, and mobile applications accessible by users, allowing sellers to be connected to other users for carrying out, collecting or paying for certain “relevant activities.”

Who must report? 

Platform operators must generally report under DAC 7 if they are resident, incorporated or have a place of management or permanent establishment in the EU; or they facilitate relevant activities carried by EU sellers or involving real estate (immovable property) in an EU country. The EU may relieve non-EU platform operators from other countries that have information-exchange agreements with the EU but haven’t yet done so.

Therefore, Israeli and other non-EU platform operators covering the EU are supposed to report under DAC 7.

Platform operators may be excluded from reporting if they demonstrate upfront and annually to an EU tax authority that they have no reportable sellers according to their business model.

What relevant activities are covered?

Relevant activities, if carried out for consideration, include: rental of real estate; personal service, i.e., time- or task-based work performed by one or more individuals; sale of goods; rental of transportation.

House and calculator [Illustrative]. (credit: INGIMAGE)
House and calculator [Illustrative]. (credit: INGIMAGE)

The following activities are not covered: payments processing; listing a relevant activity; advertising; redirecting or transferring users to a platform.

Also not covered are sellers who are: government entities; publicly traded groups; entities with more than 2,000 immovable property rentals facilitated by the platform operator, or with fewer than 30 €2,000 sale-of-goods activities in the year concerned.

Information needed

A platform operator must generally collect information about EU sellers and real estate for reporting purposes, including: name; primary address, i.e., residence or registered office; taxpayer identification number (TIN) or place of birth; VAT identification number ,where available; date of birth, if an individual; business registration number; any EU permanent establishment; financial account identifier (bank account, etc.); consideration paid or credited each quarter, also in fiat currency terms if cryptocurrency was used; address and number of days each property was listed, where relevant; fees, commissions and withholding tax levied by the platform operator.

Due diligence needed

The platform is required to check whether the information it collected is reliable, using all information and documents available in its records as well as electronic interfaces made available free of charge by EU countries to check TIN and VAT numbers. If the platform operator has reason to know of any inaccuracy, it should ask the seller to correct the information and provide supporting documentation, e.g., government-issued ID document, tax residency certificate.

The seller is considered resident where the primary address is located and in the TIN country if different.

Due diligence may optionally be restricted to active sellers paid or credited in that year. Third-party, due-diligence service providers may be used at the platform operator’s responsibility.


Due diligence must be completed by December 31 of the year concerned, and the report must be filed by January 31 with the tax authority in the EU country of residence, including incorporation, permanent establishment, reportable seller and real estate. The first DAC 7 report will be due from digital platform operators by January 31, 2024.

Getting ready

EU and non-EU platform operators may need to adapt their business model, systems, data collection and validation and terms and conditions. Data protection rules apply (Article 25).


DAC 7 requires much reporting but not tax from digital platform operators. Examples of relevant activities may include livestreaming, food delivery, ride-hailing and online training. This should help EU tax authorities to enforce tax collection from those reported.

Separate EU directives generally require non-EU B2C (business to consumer) sellers to register for VAT purposes in at least one of the EU countries unless they sell physical goods that pass through Customs.

In the case of B2B (business to business) sales by non-EU business sellers, the EU business customer must generally report the EU VAT, using the reverse-charge (self-billing) approach.

What about the US? 

Most US states now impose comparable or stricter sales-tax collection obligations on out-of-state sellers and marketplace facilitators, above prescribed dollar sales or quantity levels. This follows the US Supreme Court Wayfair Case judgment in 2018. This should be checked out state by state.

As always, consult experienced tax advisers in each country at an early stage in specific cases.

The writer is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.