From 1 January 2024, EU member states will start to impose reporting requirements on payment services providers (PSP’s) relating to their sellers’ activities.
PSP’s are third-party companies that allow businesses to accept electronic payments. These companies tend to be credit card, bank and online payment providers, and they act as intermediaries between those who make payments (customers) and those who accept the payments for a supply (suppliers).
Back in February 2020, the EU Commission confirmed that PSP’s processing e-commerce seller’s cross-border payments, where the goods are being sold to consumers, would have a requirement to report their sellers’ transactions on a quarterly basis to EU member states. EU member states would then use this information to ensure that the sellers of the goods are correctly VAT registered and declaring tax to the correct EU country on their sales. This aims to reduce the estimated €7 billion in VAT losses that occurs as a result of fraud in the sector.
This new reporting requirement will apply to any PSP that is processing more than 25 payments per quarter and a new EU-wide database called the Central Electronic System of Payment information (CESOP) will be created to hold and review all of this payment data.
PSP’s reporting and record-keeping requirements
From January 2024, the new requirements will apply to both the payee and payer’s PSP, however if both of the PSP’s are resident in the same EU country, then only the payee PSP falls under the new requirements.
Once implemented, the PSP’s will be obliged to hold the relevant information relating to these payments for at least three years and will report these on a quarterly basis with the submissions being due to relevant tax authorities by the end of the month following the reporting quarter. Tax authorities will then forward the data to the new CESOP database, where the data will be stored, reviewed and cross-checked. The data and findings will then be made available to anti-fraud experts of each EU member state for them to act if necessary.
The European Commission has not yet confirmed the definitive data requirements but has confirmed that it should be an automated electronic filing and the information to report will likely already be available to the PSP. The information will include the identity of the payee, the recipient of the funds and the seller making the supply.
EU member states that have already adopted these changes
During April 2023, Luxembourg, Belgium, and the Netherlands amended their VAT directives to include these requirements for PSP’s and have confirmed that the new legislation and reporting requirements will apply from 1 January 2024.
Finland has also formally agreed to accept these changes and will amend their VAT directive to include these changes imminently.