On January 1, 2023, the Platform Tax Transparency Act (PStTG) came into force. The Act serves to implement the so-called DAC7 Directive. It regulates the reporting obligations of platform operators regarding remuneration earned by providers of so-called “relevant activities” via the platform. Platform operators are obliged to collect the relevant data and report it to the Federal Central Tax Office (BZSt) by January 31 of the following year.

See VAT Newsletter 08/2023: Ministry of Finance letter on Platform Tax Transparency Act (PStTG - implementation of DAC7 Directive)
VAT Newsletter 31/2022: Draft law on due diligence and reporting obligations for digital platform operators (DAC7)

What is a platform?

1.    General platform term

The law defines a platform as, in particular, digital systems that enable providers and users to contact each other via the internet using software and to conclude legal transactions for the provision of a relevant activity (section 3 para 1 sentence 1 PStTG). In the legislator's view, the platform acts as part of a triangular relationship between the provider and the user and enables them to conclude a contract.

It is crucial that providers and users are registered on the platform. The exclusive sale of the system operator's own goods is not sufficient for the assumption of a platform. In this case, the aforementioned triangular constellation of platform operator, (third-party) providers, and users is missing.

 

2.    Exceptional cases

Not every digital offering that brings providers and users together constitutes a platform. This applies, for example, to internet offerings that merely list activities offered in the same way as a “bulletin board” or redirect users to the respective websites of the providers. In this case, a contract is usually concluded outside the internet offering. A platform does not exist in these constellations (section 3 para 1 sentence 3 nos. 2 and 3 PStTG).

This also applies to the mere processing of payments made in connection with a relevant activity (section 3 para 1 sentence 3 no. 1 PStTG). Likewise, different user interfaces – such as personalized booking apps – should not be regarded as separate platforms if they access the same booking database.

3.    Indirect provision of services

The question of civil law contract design for the provision of services is irrelevant for the assumption of a platform. It is not necessary for the contracts for the provision of services to be concluded directly between the provider and the user. Rather, indirect service provision by the provider is also covered by the law. Therefore, a platform may exist if, for example, the operator purchases the service from the registered provider in an intermediate step for the purpose of simplifying contract processing and then resells it to the customer (section 3 para 1 sentence 2 PStTG).

Who is the (reporting) platform operator?

Platform operators pursuant to section 3 para 2 PStTG are any legal entities that undertake to make a platform available to a provider in whole or in part. The status of platform operator is therefore to be assessed from a purely contractual perspective. The platform operator is therefore not necessarily identical with the operator of the technical infrastructure of the platform.

Whether a platform operator is also subject to the reporting obligation under the PStTG is primarily determined by section 3 para 4 PStTG. In principle, these are platform operators with their registered office, management, or a permanent establishment in Germany. However, platform operators from third countries are also covered if their business activities are related to Germany. These platform operators are subject to a registration requirement with the BZSt (see section 12 para 1 PStTG). Exceptions apply, for example, to exempt platform operators or qualified platform operators from third countries for which comparable systems of automatic exchange of information in tax matters exist.

 

Who is a (reportable) provider?

According to Section 4 para 2 PStTG, a provider is any user registered on the platform who can offer a relevant activity there. A provider can therefore also request a relevant activity from other providers at the same time. The platform operator itself, however, cannot be a user of the platform according to Section 4 para 1 sentence 2 PStTG. This means that it cannot act as a provider on its own platform.

The registration of providers is a mandatory prerequisite for the acceptance of a reporting obligation. If providers registered on a platform market the services of third parties who are not themselves registered as providers there, these third parties are not subject to the reporting obligation under the PStTG.

Providers subject to the reporting obligation must have been active during the reporting period, i.e., they must have either performed a relevant activity in return for remuneration or received remuneration (section 4 para 4 PStTG). The activities offered must always have a connection to the European Union, which is established, for example, by the tax residence of the provider or the location of rented real estate. In this way, the DAC7 Directive achieves EU-wide coverage of providers subject to reporting requirements.

What are relevant activities?

Only relevant activities within the meaning of section 4 para 1 sentence 1 nos. 1-4 PStTG are subject to reporting. Currently, this list includes the temporary transfer of rights to immovable property (no. 1), the provision of personal services (no. 2), the sale of goods (no. 3), and the temporary transfer of rights to means of transport.

1.    Use and other rights to real estate
The definition of activity in no. 1 covers well-known offerings in the sharing economy, such as short-term rentals of apartments or office space, but also the traditional hotel business. In addition, all other conceivable uses and other rights to real estate are covered, such as the rental or transfer of parking spaces or storage rooms.

2.    Personal services
In practice, personal services regularly raise questions of demarcation. The decisive criterion is the individual nature of the service, which must be provided at the prior request of the user (section 5 para 3 PStTG). This distinguishes, for example, between generally available public transport services, which are provided independently of a prior request (such as regular bus services). The provision of services itself can also be partially automated digitally. 

3.    Sales of goods
Sales of goods relate to the classic business model of many so-called “online marketplaces.” It should be noted here that, according to section 5 para 4 PStTG, only physical objects fall under the definition of goods. The steadily growing share of purely digital products (NFTs, software, and program codes) is not (yet) covered by the definition of goods. In individual cases, however, it is conceivable that the digital product was produced as part of a personal service (no. 2).

4.    Use of and other rights to means of transportation
This typically includes short-term rental of transportation (e.g., e-scooters, bicycles, or rental cars). In individual cases, a distinction must be made between personal services (such as chauffeur services or airport transfers from a hotel). The decisive criterion here is usually the power of disposal over the means of transportation.
 

What remuneration must be reported?

The PStTG is based on an independent definition of remuneration in section 5 para 2 PStTG. According to section 5 para 2 sentence 1 PStTG, remuneration is initially any form of payment that is paid or credited to a provider in connection with a relevant activity, less any fees, commissions, or taxes retained or levied by the platform operator.

The term “remuneration” in the PStTG is broadly defined. Any type of monetary or non-monetary consideration may, in principle, be subject to remuneration under the PStTG, provided that the other requirements are met. This raises particular problems when exchange transactions are concluded via the platform or user data is made available as remuneration.

In addition, the platform operator must at least potentially be aware of the amount of remuneration (section 5 para 2 sentence 2 PStTG). According to section 5 para 2 sentence 2 2nd half-sentence PStTG, the platform operator is deemed to have knowledge of the legal entities associated with it and of the service providers commissioned by it. In the opinion of the legislature, remuneration which cannot be known to the platform operator due to its business model or the nature of the remuneration is not covered by the term “remuneration.”
 

Reporting procedure

The reporting period is the calendar year (Section 6 (6) PStTG). The report must generally be submitted by January 31 of the following calendar year.

The report is submitted in DIP-XML format via the electronic mass data interface to the Federal Central Tax Office. There are currently no plans to introduce a form-based system with manual upload.

The DAC7 Reporting Tool developed by KMLZ can be used as a cloud-based solution to assist with reporting. 

Corrections

If a payment changes after the report has been submitted, for example due to withdrawal or a reduction in the fee, the report submitted becomes incorrect. In this case, the platform operator must immediately submit a corrected report to the BZSt (section 13 para 1 sentence 2 PStTG). Since a report must be submitted immediately, i.e., without undue delay, quarterly correction reports are not an option. Business models with a high volume of returns are therefore likely to require a significant number of correction reports.

Additional obligations of platform operators

In addition to reporting obligations, platform operators have extensive information and documentation obligations. The documentation requirements (section 24 PStTG) specifically concern the processes of data collection and processing (see section 24 para 1 no. 1 PStTG) and are intended to ensure that the transmitted data can be verified. The obligation to provide information to providers in accordance with section 22 PStTG is intended to protect the data protection interests of the providers concerned.

What penalties can be imposed?

Section 25 PStTG ensures compliance with reporting and administrative obligations by imposing extensive fines. According to section 25 para 1 no. 5 PStTG, anyone who recklessly submits incorrect or incomplete reports is acting in violation of the law. Such an incorrect report is punishable by an administrative fine of up to EUR 30,000.00 (see section 25 para 2 Var. 2 in conjunction with para 1 no. 5 PStTG).

This is particularly problematic in cases where a platform operator decides to “over-report” for reasons of caution, i.e., reports data that is not required. In accordance with the wording of section 25 para 1 PStTG (and subject to further, in particular subjective, requirements), the German Federal Ministry of Finance considers that an “incorrect” report would constitute an administrative offense (see German Federal Ministry of Finance, letter dated February 2, 2023, rec 2.3.).

Sections 389, 390, and 410 para 1 nos. 2 and 6 to 12 of the General Fiscal Code apply to the administrative fine proceedings (section 25 para 4 PStTG).
 

Legal certainty through information pursuant to sections 10 and 11 PStTG

Platform operators have two final procedural options available to them in the form of the information provided under sections 10 and 11 PStTG in order to obtain legal certainty regarding the existence and scope of their reporting obligations.
While section 10 PStTG concerns the existence of the requirements of section 3 para 1 and section 5 para 1 PStTG - i.e., the question of whether a platform exists and whether relevant activities are offered there - section 11 PStTG can be used to apply for a determination that a platform operator is exempt from the reporting obligation.
In practice, the information provided under section 10 para 1 PStTG has proven particularly useful. This provides legal certainty on key issues and avoids liability. At the same time, the information is relatively inexpensive due to the flat fee of EUR 5,000.