Further to the recent adoption of the VAT e-commerce Directive, which launched new VAT compliance obligations for electronic marketplaces as well as compliance simplifications for online businesses, the Commission has published proposals amending EU VAT legislation and creating new reporting requirements for payment service providers (PSPs). These businesses, which include credit card providers, involve a need to report details on clients’ payment transactions to tax authorities.
The reason for this initiative is to help tax authorities detect and crack-down on fraudulent activity. They are complementary to the new compliance rules for e-commerce and have been introduced because the Commission thinks that if these compliance simplifications are not accompanied by anti-fraud measures, fraudsters will have little incentive to change their attitude and start complying with their VAT obligations. The proposed rules will provide tax authorities with a new tool to detect VAT fraud on cross-border B2C supplies, assisting with the task of monitoring VAT compliance in the e-commerce sector.
The proposals introduce new record-keeping requirements for PSPs and the setting up of a centralised EU-wide database of VAT related payment data to be accessible by Member States specifically to fight ecommerce VAT fraud.
The main features are:
Records will have to hold the following information, when applicable:
Centralised electronic system
The Commission plans to develop an EU-wide centralised electronic payment information system, known as “CESOP”, allowing Member States to transmit PSP payment information stored at a national level. Member States’ tax authorities will be required to transmit the information they collect, from the payment service providers established in their own Member State, on a quarterly basis to CESOP, which will retain it for two years. PSPs will provide this information on standardised electronic forms.
CESOP will only be accessible to officials from Eurofisc, (the EU ‘s anti-fraud body), for the sole purpose of undertaking investigations into possible VAT fraud.
Pending these proposals being enacted, they will come into effect as of 1st January 2022. We are monitoring the progress of this initiative and shall report updates as they unfold.