DAC7 : What it means for platform businesses and why user identification matters more than ever
The digital economy has grown fast over the past decade. Marketplaces, rental platforms and gig economy services make it easier than ever for people to earn income online, often across borders. That scale also makes tax reporting and transparency harder for authorities. To address this, the EU introduced DAC7, which brings new reporting obligations for many platform operators.
This blog post breaks down what DAC7 is, why it matters, and how it changes the way platforms identify and verify their users.
What Is DAC7?
DAC7 is part of the EU’s Directive on Administrative Cooperation (DAC). It requires many digital platform operators to collect, verify and report information about sellers who earn income through their platforms.
The key reason for DAC7 is simple:
Tax authorities need more reliable data about income generated through online platforms, and platforms become responsible for supplying it.
The rules apply to any digital platform, EU-based platforms and non-EU platforms with EU users, that enables users to earn income through the following activities:
- Rental of real estate (including short-term rentals)
- Personal services (e.g., gig work, freelancing, tutoring)
- Sale of goods (e.g. sale of second-hand or used items)
- Rental of vehicles (cars, bikes, boats, etc.)
If your platform matches sellers with buyers or service providers with clients, there’s a high chance your business falls under DAC7 unless you meet narrow exemption criteria.
What information must platforms report?
To meet DAC7 obligations, platform operators must collect and report detailed user data on “reportable sellers”. This typically includes:
Identifying Information
- Full name or legal entity name
- Primary address
- Date of birth (for individuals)
- Tax Identification Number (TIN) and issuing country
- VAT number (if applicable)
- Company registration number (for businesses)
Financial and Transactional Data
- Total consideration paid or credited
- Fees, commissions, or taxes withheld by the platform
- Number of transactions
- Property details for real estate rentals
This data is submitted annually to the relevant EU tax authority, which then shares it across the EU under the automatic exchange of information framework. The reporting deadline for platforms is 31 January of the year following the calendar year being reported.
Why identity verification becomes a compliance requirement
One of the biggest shifts DAC7 introduces is the heightened responsibility placed on platforms to identify and verify their users. This isn’t just simple onboarding anymore; it becomes a compliance-critical process.
Platforms must:
- Collect mandatory user information
- Verify the accuracy of the information using reliable sources
- Monitor changes and maintain current data
- Securely store user records for regulatory audits
- Report data annually, in a standardised format
This is where many platforms struggle in practice:
- Users often submit incomplete or inconsistent details
- TIN (Tax Identification Number) formats differ across EU countries
- Cross-border sellers are harder to validate
- Manual checks do not scale as transaction volumes grow
Platforms must adopt more robust KYC-style onboarding workflows, often blending automation and documentation checks. For high-growth platforms competing in the EU market, non-compliance isn’t an option.
How Signicat can support your DAC7 journey
It may feel that DAC7 reshapes the responsibilities of digital platform operators by shifting part of the tax-compliance burden onto them. While the regulation introduces additional work, especially around identifying and verifying end users, it also promotes transparency and levels the playing field across the digital economy.
Signicat supports platform providers in achieving efficient ways to cover your DAC7 reporting obligations. We do that by providing tools and technology to collect mandatory user information and remotely verify the identities of platform users, as well as to verify & monitor address and country of residence information that is needed for reporting.
- Identities can be verified through more than 35 trusted eID identity schemes from various governments, bank consortia, trade organisations and others.
- Identity document and biometric verification solutions like Signicat VideoID and ReadID, can be used to verify the user identity in case eIDs are not available.
- Identity data obtained through eIDs or ID documents verification can be enriched with address, country of residence or several other data points from 200+ risk and identity data sources supported by Signicat platform.
Leading platform providers and mobility companies use Signicat to support compliant onboarding and reporting workflows. If you’d like to discuss your setup, get in touch.