OVERVIEW

A new EU Council Directive 284/2020 requires Payment Service Providers (PSPs) to collect and report data regarding cross-border payments. This measure is being introduced as part of an EU-wide regime to detect and combat VAT fraud arising from cross-border e-commerce transactions.

The new reporting obligations are only applicable in respect of cross-border payments. A payment is considered cross-border when it is made by a payer located in an EU Member State (and irrespective of whether in the capacity as a business or otherwise) to a payee located in another jurisdiction (irrespective of whether this is within or outside the EU). The concept of payment is closely linked to the definition of “payment transactions” laid down in article 4 (5) of the PSD2 but also covers money remittances as defined in article 4 (22) of the PSD2.

REPORTING COMPLEXITY

The new reporting obligation applies to all PSPs (i.e. credit institutions, payment institutions, electronic money institutions, and post office giro institutions) which provide any of the following payment services:

• Payment transactions and transfers of funds on payment account
• Payment transactions covered by a credit line
• Issuing of payment instruments and acquiring of payment transactions
• Money remittance

Article 243(b) rules specify that PSPs must keep sufficient records of payees and of payment to satisfy the requirements of the Directive for cross border transactions, irrespective of whether the payee is a client of the PSP. When establishing the location of the payer or payee, the regulation goes into significant depth specifying approaches and priorities to be used to determine this location. In addition, a minimum threshold on the number of payments is defined that must be exceeded for each payee for reportability criteria. This reporting is to be done on a quarterly basis, within 30 days of the end of the reporting period.

REPORTING TO CESOP

The information collected by the authorities will be transferred to a centralised European database, the Central Electronic System of Payment information (CESOP), which has been set up for reporting and storing the payment information and for further processing of this information by national anti-fraud officials. The data reported in CESOP will be made available to the local tax authorities.

HOW CAN COMPUTIME FINTECH HELP?

Our reporting solution ensures regulatory compliance for this new obligation. The solution can either integrate directly with existing banking and financial platforms or allow a batch import of transactions for which datapoints must adhere to specifications provided.

Computime FinTech’s reporting solution, is a tried and tested solution which is highly scalable from the smallest to the largest institution. Solution provides a pre-configured intelligent rule engine, designed and developed by regulatory experts. With our solution institutions need not worry about understanding the detailed laws and regulations specified by the European Commission.

With quick deployments with minor mapping and configuration requirements, your company can sit back and allow our solution to take away the complexities of identifying exactly which transactions should be reported to the local tax regulator.

The format for data transmission to the tax authority is mandated in a specific XML format, which may vary from jurisdiction to jurisdiction. Our reporting solution can fully handle multi-jurisdictional requirements for PSPs based across one or multi locations. The export of the reportable data is automatically converted to the required format, putting the compliance users’ mind at rest on the technical specifications.

TIMELINES

This new VAT Directive comes into effect from 1st January 2024. PSPs are required to submit the data by no later than by the end of the month following the calendar quarter to which the information relates. The data will be reported by means of an electronic standard form. However, it is recommended that PSPs start preparing in advance for this Directive and have a solution in place by Q4 of 2023.