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The European Commission has been combatting VAT fraud for some time now. To this end, new VAT laws and regulations are set to be introduced. The collection of VAT will be further centralised, and the tax authorities will have more information at their disposal. What does this mean for payment service providers?
The most recent change means that platforms will, in certain cases, become responsible for the payment of VAT. The next step is that, as of 1 January 2024, payment service providers will be required to share information regarding e-commerce transactions within the EU, with local tax authorities. This measure aims to offer the local tax authorities more control over what taxpayers receive and what they pay. This leads to faster detection, by the authorities, of VAT fraud.
Which transactions does this concern?
Payment service providers must keep records of cross-border e-commerce transactions (for a period of 3 years). These transactions must be shared with the local tax authorities through a special system. In this regard, it is important that the payment is performed from EU country A and that the payment is received in EU country B. Currently, non-EU parties are not included in these new rules.
Which details must be shared?
It concerns the data needed to identify all parties involved in a transaction. It covers:
- At the level of the payer: information such as the IBAN number or other information from which the location of the payer can be inferred
- At the level of the payment service provider: information such as the VAT identification number and the BIC/Swift number
- At the level of the payee: information such as the VAT identification number, IBAN number and address details
Additionally, general information concerning the transaction must be shared, such as amount, date, currency and so on.
How must the information be shared?
The information will be shared with the local tax authorities (tax authorities of the EU country where the payment service provider is established) through a special system. Payment service providers must upload the required information through the ‘Central Electronic System of Payment information’ once every calendar quarter.
The implementation of these rules is still some way off, but it is still a good idea to prepare yourself. If you are a payment service provider, start analysing the changes for your business as soon as possible.
How can I help?
Are you a payment service provider, and do you have any questions? Please feel free to reach out to me.