CESOP, DAC7 directive and SUP- these are some of the most significant legal changes that e-sellers will have to adapt. What provisions regarding cross-border trade will come into force in 2024? IdoSell expert explains.
This year presents e-entrepreneurs with new challenges, particularly those who conduct business in a cross-border model. They will face such legal changes as CESOP and DAC7 directive. However, these are not the only regulations they will need to adapt to.
The DAC7 directive and transaction reporting by online platform operators. A key element of the upcoming changes for entrepreneurs selling in the cross-border model is the DAC7 Directive. It provides for the collection and verification of information about sellers by digital platform operators. DAC7 will force trading platforms in the EU to report data on the sale taking place on these platforms. One of the reasons for the establishment of the DAC7 Directive is the fact that the cross-border dimension of services offered by platform operators has contributed to the creation of a complex environment where enforcement of tax laws and ensuring compliance can pose challenges.
“There is a lack of compliance with tax laws, and the value of unreported income is substantial. Tax administrations of EU member states do not have enough information to correctly assess and control gross income earned in their country from commercial activities conducted through digital platforms. This is particularly problematic when income or taxable base passes through digital platforms headquartered in another jurisdiction,” explains Rafał Malujda, legal counsel at IdoSell.
With this in mind, the DAC7 Directive provides a new tool, so-called joint controls, which would take the form of administrative proceedings conducted jointly by the competent authorities of at least two member states. They will apply to at least one person who is the subject of interest to the competent authorities of the member states (e.g., a person residing in Poland selling on the e-Bay platform in Germany).
“The DAC7 Directive introduces new transaction reporting requirements on digital platforms. Online platform operators will provide the head of KAS with information about sellers on the internet. The reports for 2023 and 2024 are to be submitted by January 31, 2025, and the long-awaited implementation of the Directive is scheduled to come into effect on July 1, 2024. Platforms must collect data from the moment the seller exceeds the threshold of 2000 euros or 30 transactions in a given settlement period,” adds Rafał Malujda. This is another step taken by the European Union to tighten the tax system. The new provisions are intended to reduce the number of unreported economic activities that conduct sales via the internet. DAC7 will cover platform operators such as Allegro, Amazon, eMAG or OLX, i.e., those entities that provide the possibility of establishing contact with potential customers within their software.
Central Electronic Payment Information System (CESOP)
Cross-border in e-commerce cannot function without the appropriate payment service providers. Merchants selling in a cross-border model must be aware that since the beginning of this year, new obligations have been imposed on payment system providers. They involve recording and sharing payment recipients’ evidence of selected cross-border transactions. This refers to payment services provided by platforms.
“New regulations will apply when the payments made by the service provider are cross-border, so money will be transferred from a payer located in a member state (EU country European Economic Area country) to a payment recipient located in another member state, either within or outside the EU or EEA. The second condition is when a payment service provider carries out more than 25 payments to the same payment recipient in a given member state in a calendar quarter,” says Rafał Malujda.
In this case, the sellers are not subject to any additional obligations. It is, however, another sign that the legislator aims to ensure a high level of transparency in cross-border settlements, the expert points out.
SUP Directive (a.k.a. the plastic directive) and cross-border
The SUP Directive, i.e. the Single Use Plastic Directive on reducing the impact of certain plastic products on the environment, was introduced into Polish legislation earlier last year. Now another “tranche” of it, which involves charging (an additional) fee on customers buying products, beverages or food in those products, bearing the costs of waste resulting from specific products and financing public educational campaigns, is coming into force. In turn, from July this year, further rules will apply, aimed at ensuring the availability of alternative packaging through commerce and catering and requiring the lids and caps of synthetic materials to be attached to beverage packaging. What does SUP foresee in the area of crossborder?
“According to the Directive, the SUP Act imposes on producers, who are entities based in the country and directly sell to another member state of the European Union through distance contracts (this category mainly includes domestic entrepreneurs selling the aforementioned products online to other member states), the obligation to appoint an authorized representative in each member state where they conduct sales. This will be an additional restriction, most likely for larger entrepreneurs,” emphasizes Rafał Malujda.
What to prepare for?
New regulations show that proper accounting and correct invoicing will play an increasingly important role in settling cross-border transactions. The increasing amount of reporting to public bodies by the entities involved in the e-commerce sales chain and the transparency in the area of invoicing mean that, in 2024, sellers should verify whether they have properly identified cross-border sales scenarios. For example, whether they correctly calculate VAT rates.
“For example, a seller who operates in Poland can issue a VAT invoice to a German entrepreneur with a 0% VAT rate if the supplier has proof in its documentation that the goods have been exported from Polish territory and delivered to the buyer in a member state of the EU other than Poland. This scenario is not controversial when the goods are actually shipped abroad directly by the seller. However, it happens that a seller delivers goods to a business, e.g., from Germany on the territory of Poland, and in order to issue an invoice with a 0% rate, it relies solely on a buyer’s statement that the latter will meet the prerequisites indicated in tax regulations. This approach is risky as in such a situation we do not have proof of goods being exported abroad,” says Rafał Malujda.
