Compulsory transmission & exchange of cross-border payment data to fight VAT fraud as of 2024
In accordance with Regulation (EU) 2020/284 and Directive (EU) 2020/283, the EU in another endeavor to detect and eliminate fraud in VAT, will implement CESOP, namely the Central Electronic System of Payment Information, with expected start date 1st January 2024. CESOP embodies a database for payment service providers, who are compelled to transmit information on cross-border payments, allowing the tax authorities of the Member States to detect possible e-commerce VAT fraud committed by sellers established in another Member State or in a non-EU country.
Subsequently, information must be conveyed to the Member States in CESOP, where they will be stored, aggregated, and cross-checked with other European databases. All data in CESOP will then be accessible to anti-fraud experts in Member States, to conduct inspections for the detection of e-commerce VAT fraud. Furthermore, a reference to the obligations imposed on payment service providers, is also present in Directive (EU) 2015/2366 on payment services in the internal market (PSD2), and as such, complete comprehension of the new rules requires knowledge of both VAT regulation as well as the PSD2.
Pursuant to PSD2, the payment service providers affected are credit institutions, electronic money institutions, post-office giro institutions and payment institutions. Even natural and legal persons who are exempt under PSD2, are designated as payment service providers for the purpose of CESOP. Additionally, the European Commission, has clarified the application of the principle substance over form. Ergo, marketplaces harvesting and retaining capital in their own name, prior to beneficiary allocation, will be considered payment service providers in accordance with CESOP.
The publication of a Directive in the Official Journal of the European Union describes the form as well as data that must be assembled by payment service providers. More specifically, data that must be adduced includes, among other, the identification code (BIC), the name of the beneficiary, the VAT number of the beneficiary and the IBAN of the beneficiary. Starting January 2024, the necessary data will be transmitted on a quarterly basis, no later than the end of the month following each individual quarter, in the following manner:
- 1st period (January-March): 30 April
- 2nd period (April-June): 31 July
- 3rd period (July-September): 31 October
- 4th period (October-December): 31 January
How can KPMG assist?
Should you like to further discuss the content and potential impact of the above, please contact one of our trusted advisors from the Indirect Tax Department at KPMG Cyprus.
KPMG’s Indirect Tax team provides advice and assistance at the Cyprus and international level. We structure our effort to dovetail with your business issues and strategy. Our focus is on supplying value adding and pragmatic advice rather than just a list of recommendations.