Tourist rentals: DAC 7 and new fulfillments for Property Managers

The DAC7 Directive, in order to prevent the risks of tax fraud, tax evasion and tax avoidance brought about by the rapid digitalization of the economy, has as its primary objective the enforcement of mandatory disclosure fulfilments due by Platform Operators, who are required to obtain and provide specific information regarding the sellers who use their platforms to the Tax Authority, as part of a larger strategy of information exchange.

In particular, Art. 2 of Legislative Decree no. 32/2023 has established that:

Pursuant to Principle of Law no. 3 (dated October 3, 2024), the Tax Authority, as it relates to the concept of “Platform”, has specified that the abovementioned definition does not necessarily require direct contact between the sellers and the buyers on the website; in fact, the fulfilments as described will be mandatory even when the relevant business activities are carried out indirectly, i.e., through the Platform itself or the Platform Operator.

The possibility that the business activity may be carried out indirectly by the Seller will thus need to be defined as any lease that is executed by the Platform Operator on behalf and in the name of any Seller (as user of the Platform) will need to be included in the DAC7 disclosure fulfilments.

As it pertains to the concept of Seller, the Tax Authority has highlighted that the “registration” of the Seller’s information on the Platform must be considered very broadly, and thus include all cases in which the Platform acquires data on the Seller. Therefore, included in such definition are those cases in which the user has not registered directly into the Platform by creating a specific account or profile, but has instead entered into a contractual agreement with the Platform Operator instead.

The DAC7 regulation, by requiring specific disclosure fulfilments for Platform Operators, impacts also those PMs who manage e-commerce websites through which property rentals are offered on behalf of private property owners (with whom they have signed agency contracts, both as with or without power of attorney).

In fact, as mentioned before, pursuant to Legislative Decree no. 32/2023, the Platform Operator is the legal entity that allows private owners, by virtue of an appropriate contract, to use their Platform, defined, as we have said, as the software through which users connect, either directly through a proprietary booking engine or indirectly through other Online Travel Agencies (so-called OTAs), private property owners and potential guests in order to facilitate the conclusion of lease agreements.

In short, as far as the activities of the PMs who operate on digital platforms are concerned, the disclosure fulfilments introduced by the DAC7 Directive require that those PMs, who qualify as Platform Operators (bear in mind that there are exclusion and exemption cases), provide the necessary information related to the rental activity of real estate properties, located in Italy or in another EU Member State, in order to contribute to EU data collection systems, with the final aim of assessing the level of tax compliance of such business operators.

If the PM, based on the agency contract, manages the OTA accounts in its own name, thus collecting the sums due and acting as a tax withholding agents, such PM should be considered a Platform Operator as pursuant to the DAC7 Directive. The PM will be considered Platform Operator even in the case that the OTA accounts are not managed in its name, as it is sufficient that the PM directly collects the related sums and acts as a tax withholding agent.

Vice versa, should the OTA accounts be in the name of the individual property owners, who collect the related rental income directly, and thus bypassing the PM, the latter will not be considered a Platform Operator; in such case, it would fall onto the OTA Platform to fulfil all required reporting duties as per the DAC7 Directive. 

Therefore, the Platform is defined as such only insofar as it is intended to be used to manage at least two of the following business activities:

Whenever the Platform used (either the application or website) allows only one of the three activities defined above and listed in Art. 2, co. 1 a) of Legislative Decree no. 32/2023, the PM who utilizes such Platform will not be legally considered a Platform Operator and will thus be exempted of all reporting fulfilments pursuant to the DAC7 Directive.

Within such framework, the extensive interpretative definitions provide by Principle of Law no. 3 of October 3, 2024, have resulted in the broadening of the range of businesses who will be required to provide and exchange rental information, as not only will such reporting duties be expected of those operators who utilize their own Platform on behalf and in the name of sellers, but also those operators who allow unregistered sellers to utilize their Platform, if such sellers have entered into contract with the operators themselves, will be required to fulfil all DAC7 disclosure obligations.

The disclosure reporting will need to be mandatorily fulfilled within January 31st of the year after which the Seller has been identified as Seller Subject to Communication, while the automatic exchange must occur within two months after the end of the period to which such disclosures refer to.

Such duties took effect on January 1, 2023; therefore, Platform Managers, who were required to report the first relevant information as early as January 31, 2024 (finally extended to February 15, 2024), will henceforth have to adapt their business model to these new disclosure requirements.

With regards to the applicable penalties, please note that any omitted DAC7 disclosure will be fined up to EUR 31,500.00. All DAC7 disclosures filed after February 15, 2024, are considered late but may be filed nonetheless (as supplementary or integrative DAC7 disclosures are allowed); however, the Legislative Decree does not indicate a deadline.

Finally, here follows a brief overview of the disclosure requirements.

Those PMs obligated to disclose information to the Tax Authority must clearly indicate the identifying cadastral information of the properties and must specify, of the total collected income, the amount attributable to the owner as rental income and the amount attributable to the PM as consideration for services rendered.

Therefore, for each leased property, it should be reported:

The Manager must further make sure of the reliability of the information acquired and must include in the contracts with the property owners an appropriate and unilateral clause according to which, should the owner not provide all the requested information after two reminders, and without having obtained a response within sixty days from the last notice, the Manager must either forfeit the promotion of the property or, in case they continue to promote it, must retain for itself the consideration due to the owner until they have received all information as requested.

Please note, finally, that the Tax Authority, with the publication of order dated November 20, 2023, has officially finalized the contents, methods and terms of certain notices, attaching the respective formats to which Platform Managers (including those excluded) are required to comply.