The OECD has developed the Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing and Gig Economy (hereafter the Model Rules) which were approved by the OECD/G20 Framework on BEPS on 29 June 2020. To allow the swift and coherent implementation of the Model Rules, the OECD worked (is working) on the international legal and technical framework to facilitate the automatic exchange of the information collected under the Model Rules between tax administrations, (which is expected to be completed in the second half of 2020). The full text of the rules is available at www.oecd.org/tax/exchange-of-tax-information/model-rules-for-reporting-by-platform-operators-with-respect-tosellers-in-the-sharing-and-gig-economy.htm
This Annex provides an overview of the key features and architecture of the Model Rules.
The Model Rules foresee a targeted scope of transactions to be reported so as to enhance adequacy and efficiency. They enable targeted reporting in respect of (both entity and individual) Sellers from the rental of immovable property and provision of transportation, delivery and other personal services (other than those provided by a seller pursuant to an employment relationship with the Platform Operator). By ensuring that the Model Rules capture only certain types of services and that the information is made available to the jurisdiction(s) in which there is likely to be a tax impact, the rules seek to address as a matter of priority the (direct) tax compliance risks posed by such activities in light of their scale, the income they generate and the profile of the Sellers involved. The Model Rules recognise however that as digital markets are rapidly evolving and other types of transactions may become relevant, the scope of the Model Rules may need to be expanded as appropriate. It is irrespective of whether such services are provided directly by third party sellers or users or whether the platform first purchases such services and then offers these services in its own name to users. These services are collectively referred to as Relevant Services for the purposes of the Model Rules. The Model Rules feature exclusions for services performed by governmental entities, large hotel operators and providers of scheduled publicly-accessible transportation (such as railroads and bus services).
Entities that contract with Sellers to make available the Platform are in principle subject to the Model Rules when they are resident, incorporated or managed in the jurisdiction adopting the Model Rules. The term Platform does not include software exclusively allowing the processing of payments, listing or advertising or redirecting or transferring of users to a Platform with respect to the Relevant Services. There are optional exclusions (i.e. at jurisdictions’ discretion) for small-scale platforms operators (with aggregate consideration at the level of the Platform over the previous year less than EUR 1 million) and platforms that do not allow the Sellers to derive a profit from the consideration received or that do not have Reportable Sellers.
A two-step information flow is foreseen: the information is first reported to the tax administration of the jurisdiction of residence of the Reporting Platform Operator, which then exchanges the information with the Reportable Jurisdiction in which the Seller is resident or where the immovable property is located. The rules require annual reporting to tax authorities of the jurisdiction of residence by 31 January of the year following the Reportable Period. They also require that the platform operators provide their sellers with an information statement of the amount of the consideration they have earned through the platform as well as any fees, commissions and taxes paid or withheld.
To enable effective taxpayer matching, the Model Rules foresee the reporting of a Seller’s name, primary address, Tax Identification Number (including a VAT/GST Registration Number issued by the jurisdiction of the Primary Address of the Seller) and date of birth. The Model Rules also foresee the possibility to confirm the identity and tax residence of a Seller through a so-called government verification service. In the context of rental of immovable property services the Model Rules require that the address of the property as well as wherever available the land registration number and type of each property listing (e.g. hotel, apartment, parking space) as well as the number of days each property listing was rented are reported.
To support tax compliance activities and, where possible, prefilling of tax returns, jurisdictions will also receive information on the types of services provided and the income earned by the Seller during each quarter of the reportable period and the number of such Relevant Service in which this consideration was paid or credited. Consideration is the amount net of any fees, commissions or taxes withheld or charged by the Reporting Platform Operator. The information with respect to the consideration and other amounts must be reported in respect of the quarter in which those amounts have been paid or credited. Where the consideration is refunded after the reporting deadline, for instance in case of cancellations of transactions the Reporting Platform Operator is expected to submit a corrected report reflecting any relevant changes. Moreover procedures are foreseen to avoid duplicate reporting in cases involving multiple Platform Operators in respect of a single Platform.
The Model Rules provide due diligence and reporting rules that ensure that accurate information gets reported without imposing overly burdensome procedures on Platform Operators. Generally the verification of the information collected and reported needs to be done by the Platform Operator by using all records available to it including information already collected for AML/KYC purposes, as part of its on-boarding or re-documentation procedures, for payment purposes or other commercial or regulatory ends.
The Model Rules work on the basis that the jurisdiction implementing the Model Rules will be, in principle, interested in receiving information in respect of Sellers resident in their jurisdiction.
With respect to cases where the Platform Operator is resident in a jurisdiction that has not implemented the Model Rules or is not an exchange partner of the jurisdiction implementing the Model Rules and therefore the information cannot be obtained from a Partner Jurisdiction, the Model Rules recognise the possibility that a jurisdiction may want to impose local reporting on platforms in the jurisdiction in which Sellers are resident or where immovable property being rented is located.
The Model Rules provide a reporting regime that can also be used for other tax-related purposes such as indirect taxes, local taxes and social security contributions, provided this is permitted under the relevant international exchange agreement.