Reporting obligations for platform operators under the Platform Tax Transparency Act (PStTG)

With the Platform Tax Transparency Act (PStTG), the national legislator has implemented the EU Council Directive RL (EU) 2021/514 of 22.03.2021 - in short "DAC 7-RL". The PStTG regulates comprehensive reporting obligations for platform operators and an automatic information exchange procedure between EU member states.

1. Tax background to the Platform Tax Transparency Act (PStTG)

Conducting business activities via digital platforms is anything but a new phenomenon. The American-dominated major providers such as Ebay (founded in 1995 - active in Germany since 2000) and also Amazon (founded in 1994 - active in Germany since 1998) have been active for decades and offer their users extensive economic opportunities. The sales and profits generated by such economic activity have long remained hidden from the tax authorities. Requests for information from the tax authorities to the European headquarters, which are mostly located in Luxembourg, rarely provided the desired results. It was not until 2013 that the German Federal Fiscal Court (Bundesfinanzhof, BFH) ruled in a case involving criminal tax law that the Luxembourg parent company was obliged to hand over the data of German users. The aforementioned Directive and the German Implementation Act (PStTG) are intended to standardize the information obligations in favor of the tax authorities on the one hand. On the other hand, however, the scope of the information obligations for companies is to be significantly expanded.  

In the meantime, the Federal Ministry of Finance (BMF) has also commented on the provisions of the PStTG in a letter dated February 2, 2023 (BMF letter dated February 2, 2023, IV B 6 - S 1316/21/10019 :25).

The PStTG obliges operators of digital platforms to report the information listed in Section 14 (2) and (3) PStTG on the providers subject to the reporting obligation to the Federal Central Tax Office (BZSt) and to transmit it electronically. The reporting period is the calendar year. The report must be transmitted to the BZSt by 31.01. of the following year at the latest. The first report under the PStTG must be submitted by 31.01.2024 at the latest.

Platform operators subject to the reporting obligation therefore have good reason to hurry. They must promptly introduce a corresponding audit system and processes in order to be able to fulfill their reporting obligations on time by January 31, 2024. From now on, it is incumbent on the platform operators subject to reporting requirements to provide data to the tax authorities in a systematic manner that enables the tax authorities to identify active providers on platforms and to carry out the tax assessment of the reported transactions. With the PStTG, the legislator has thus tightened the control network and the audit options of the tax authorities. Taxpayers who offer their goods, services, etc. on platforms would do well to declare their income in full to the tax authorities. This is because the PStTG serves to enable the tax authorities to build up a comprehensive database. The tax authorities are also able to review tax issues retrospectively. The assessment of untaxed income can be made retroactively for up to 13 years.

The PStTG also has cross-border significance. In the future, the Federal Central Tax Office will inform the tax authorities of other EU member states about investigations and decisions within the scope of the PStTG. The PStTG is purely a procedural regulation. The PStTG does not contain any substantive tax rules.

2. Definitions of the Platform Tax Transparency Act (PStTG)

• Platform

Pursuant to Section 3 (1) PStTG, a platform is any system based on digital technologies that enables users to contact each other via the Internet using software and to conclude legal transactions aimed at the provision of relevant activities (Section 5 PStTG) by providers for other users or the collection and payment of remuneration related to a relevant activity (e.g., Amazon stores).

The prerequisite for the existence of a platform is that users can interact with each other via a system based on digital technologies. It follows that pure online stores do not fall within the scope of the PStTG. A pure online store exists if a provider exclusively offers its own goods or services via its own website. A different situation is said to exist if a user first provides a service to a platform operator and the latter then provides the service to another user in its own name. The explanatory memorandum to the PStTG (BT-Drs. 20/3436) provides the following example: A platform enables restaurant operators to offer their services to other users of the platform. If a user orders a dish from a restaurant operator's offer, a contract is first concluded between the restaurant operator and the platform operator and only then between the platform operator and the user. A platform is said to exist here because both providers and users are registered on the platform and they can at least indirectly contact each other (e.g. Lieferando).

• Platform operator

With regard to the person of the platform operator, the PStTG differentiates:

• Exempted platform operators

Upon application, a so-called exempted platform operator can be exempted from the annual reporting obligation. The application requires that the platform used by the platform operator can only be used by exempted providers or by providers without EU nexus (so-called non-reportable providers).

The application for exemption is subject to a fee and is valid per reporting period, i.e. calendar year. It must be applied for no later than 31.10. of the calendar year for the following reporting period. A simplified procedure exists for the extension of the exemption.

• Qualified platform operator

Qualified platform operators are those platform operators that are domiciled in a third country that has concluded an effective agreement on the automated exchange of information with all EU member states. The agreement on the automated exchange of information must relate to the relevant activities specified in Section 5 PStTG.

• Reporting platform operator

Notifiable platform operators can be those that are domiciled in the country, in another EU member state or in a third country.

A notification obligation exists if there is no exemption within the meaning of § 11 PStTG and one of the following criteria is met:

• The registered office or management is located in Germany
• Platform operator is registered under the laws of the Federal Republic of Germany,
• Platform Operator maintains domestic permanent establishment and is not a Qualified Platform Operator,
• Platform operator is not a qualified platform operator, i.e. it does not have its registered office, management or permanent establishment in another EU member state, nor is it registered in another member state and operates a platform on which either (a) reportable providers offer an activity or (b) through which the use of immovable property in an EU member state is made possible.
• Users

Users are persons who make use of a platform without being platform operators themselves. This includes natural persons as well as legal entities, associations of persons and estates.

• Provider

Natural persons and legal entities (legal entities, associations of persons and estates) that are registered on a platform and offer a relevant activity within the meaning of Section 5 PStTG are so-called providers.

With regard to the person of the provider, the PStTG differentiates as follows:

• Existing providers

These are providers registered on an existing platform already subject to reporting requirements as of 01/01/2023 and those providers registered with a platform that will become subject to reporting requirements for the first time after 01/01/2023.

• Active providers

These are providers who perform a relevant activity within the meaning of Section 5 PStTG or receive remuneration for a relevant activity within the meaning of Section 5 PStTG during the reporting period.

• Exempt providers

§ Section 4 (5) PStTG contains a catalog of so-called exempt providers:

• State legal entities (Section 4 (5) no. 1 PStTG)
• Entities whose shares are traded on a recognized stock exchange (Sec. 4 (5) No. 2 PStTG)
• Entities affiliated with an exchange-traded entity (Sec. 4 (5) No. 2 PStTG)
• Legal entities that have performed relevant activities (rentals) in relation to an advertised real estate unit using the same platform in more than 2,000 cases during the reporting period (Section 4 (5) no. 3 PStTG)
• Natural persons and legal entities who, in the reporting period, have made sales of goods using the same platform in fewer than 30 cases (legal transactions) and have thereby paid or been credited a total of less than 2,000 euros as remuneration. In other words: Anyone who makes fewer than 30 legal transactions in a calendar year and thereby earns EUR 2,000 or more is NOT an exempt provider and may be subject to the reporting obligation in the same way as a provider who makes more than 30 legal transactions but thereby earns less than EUR 2,000.
• Notifiable providers

Notifiable providers are those that are active - non-exempt - providers and

• are domiciled in Germany or
• are resident in another EU member state or
• offer immovable assets located in an EU member state via a platform.

Residence is determined by the registered office, domicile or tax identification number.

• Relevant activities

§ Section 5 (1) PStTG defines a catalog of relevant activities as follows:

• Temporary transfer of usufruct and other rights of any kind in immovable property (Sec. 5 (1) No. 1 PStTG)

This applies to the transfer of use for both private and commercial purposes. The type of use is irrelevant, i.e. residential purposes as well as storage purposes are covered. AirBnB is one of the most prominent examples.

• Provision of personal services (§ 5 para. 1 no. 2 PStTG)

According to the materials on the legislation, the term personal services is to be interpreted broadly and covers both physically and virtually provided services. The service must be personalized, i.e. the user must have at least the potential to influence the execution of the service before or during its provision. Moreover, the service must be sufficiently tailored to the specific requirements of the user or a group of users. The explanatory memorandum to the law (BT-Drs. 20/3436) names exemplary: transport and delivery services, craft activities, teaching activities, text design, data processing as well as office, legal or accounting activities, if these are carried out at the specific request of a certain user or a certain group of users. Both occasion-related services and longer-term activities are covered. Purely ancillary activities that are only of secondary importance (e.g. packaging of goods) are not covered.

• Sale of goods (§ 5 para. 1 no. 3 PStTG)

Goods within the meaning of Section 5 (1) No. 3 PStTG are only physical objects. Water, heating or electricity are not included. One of the most prominent examples here is Ebay.

• Temporary transfer of use and other rights of any kind to means of transport (§ 5 para. 1 no. 4 PStTG)

The provision of Section 5 (1) No. 4 PStTG covers all motorized and non-motorized means of transport on land, water or in the air. It covers (only) the individual transportation of persons and/or goods, which can take place to the exclusion of third parties. Uber is one of the most prominent examples of this.

3. What is the reporting procedure under the Platform Tax Transparency Act (PStTG)?

The reporting period is the calendar year (§ 6 para. 6 PStTG).

Reporting platform operators must report the information specified in Section 14 PStTG relating to the reporting period to the Federal Central Tax Office (BZSt) electronically (remote data transmission via official interfaces) in accordance with the officially prescribed data set no later than January 31 of the year following the calendar year in which the provider was identified as a provider subject to the reporting obligation, i.e., for the first time by January 31, 2024.

Pursuant to Section 13 (2) PStTG, a platform operator subject to the reporting obligation who is also required to report the information specified in Section 14 PStTG to the competent authority of another EU member state (so-called multiple reporting) has a right of choice. He can decide in which EU member state he reports. All competent EU reporting authorities must be informed of this decision accordingly (Section 13 (2) sentence 2 PStTG).

If a platform operator realizes at a later date that a report has not been submitted, has not been submitted correctly or has not been submitted in full, it must make up for, correct or complete the report without delay (Section 13 (1) sentence 2 PStTG). If the original report is not made up, corrected or completed, this constitutes an administrative offense. This can be sanctioned with a fine of up to EUR 30,000.00 (Section 25 (2) Alt. 2 PStTG). Other violations can be sanctioned with a fine of 5,000.00 EUR up to 50,000.00 EUR. So if there are structural errors in the (digital) recording of transactions subject to reporting, these fines can quickly grow into the millions of euros if there are a corresponding number of cases. The responsible fine authority is the Federal Central Tax Office.

4. What is reportable data within the meaning of the Platform Tax Transparency Act

Pursuant to Section 14 (2) and (3) PStTG, the following data and information in particular must be reported:

5. Do the platform operator have any information obligations towards the provider?

Prior to the initial reporting of the data to the Federal Central Tax Office (BZSt), the platform operator shall inform the respective provider in general terms as follows:

• Information that, in particular, personal data is collected for the purpose of carrying out the taxation procedure and transmitted to the BZSt for forwarding to the competent state tax authorities or the competent authorities of other EU member states (Section 22 (1) no. 1 PStTG),
• all information to which the provider is entitled on the part of the data controller, in sufficient time to enable the provider to exercise its data protection rights (Section 22 (1) no. 2 PStTG),
• Notification of the data reported to the BZSt.

6. Binding information from the Federal Central Tax Office (BZSt) on reporting requirements

If there are doubts with regard to any reporting obligations, information can be obtained from the BZSt (Section 10 PStTG). The information provided by the BZSt is then legally binding if the actual and realized facts correspond to the facts on which the request for information was based.

However, only the question of whether a platform within the meaning of Section 3 (1) PStTG and/or a relevant activity within the meaning of Section 5 (1) PStTG exists is eligible for inquiry.

According to the content, the application must take into account the following points:

• The exact name of the applicant;
• a comprehensive and self-contained presentation of the facts;
• a statement of the particular interest of the applicant;
• a detailed statement of its own legal position;
• the formulation of concrete legal questions;
• a statement as to whether and, if so, in which other Member States of the European Union the applicant has requested such information in accordance with the legislation in force there and, if so, the content of the information provided to him;
• the assurance that all information required for the provision of the information and for the assessment has been provided and is true.

LHP Luxem Heuel Prowatke Rechtsanwälte Steuerberater PartGmbB advises you on questions regarding the Platform Tax Transparency Act (PStTG).

As attorneys, tax consultants, tax law specialists in Cologne, we offer many years of experience in the field of tax law and criminal law. Each of our lawyers has a double qualification, some of them were tax officials themselves for many years.

We provide you with comprehensive advice on the PStTG. You will always have a competent contact person for questions and will be informed about the current status of your procedure at any time without being asked.