13 February, 2023
From 1 January 2024, under the EU Cross Border Payment Service Provider Reporting payment service providers (PSPs) will have to collate and submit data on cross-border payments received by businesses from customers. PSPs must submit this data to the tax administrations in each European Union (EU) Member State in which they provide services.
The EU will establish a new central electronic system of payment information (CESOP) to facilitate the reporting and to store the payment information. The aim is to modernise current cross-border VAT procedures and combat existing VAT leakage in the EU. Reporting will allow EU tax authorities to monitor e-commerce transactions and tax them appropriately.
The new rules will impact the following four categories of EU PSPs, as defined under Directive (EU) 2015/2366 (PSD II):
Central banks and public bodies are not affected by the CESOP reporting obligation, as they typically do not provide the payment services in scope.
Payments within scope include:
Where the PSP will be deemed to be within the scope of reporting, the reporting obligation will become effective when the payment services meet the following conditions:
A payment is considered cross-border when it is made by a payer in an EU Member State to a payee in another jurisdiction (irrespective of whether this is within or outside the EU).
Where the PSP of the payee is located in the EU, they will be subject to the reporting requirement. If the payee’s PSP is not located in the EU, the obligation to report falls on the PSP of the payer.
PSPs must file a return with their Member States each quarter. The return should be made electronically and in a specified XML format.
PSPs must file a return with every Member State where they provide services that are within the scope of the reporting obligation. For example, a PSP established in Ireland may provide payment services to payees in Ireland, France and the Netherlands. In this case, the PSP will need to submit returns in these three countries.
The following data will need to be submitted:
If you will be affected by these new requirements, consider this three-step process:
Now is the time to identify if your company is within the scope of the reporting obligations for the new PSP rules. If so, you must identify the scope of transactions that will meet the conditions of a “cross-border payment” and will breach the threshold of 25 payments.
If you are within the scope of PSP reporting obligations, it is important that you establish appropriate systems to collect the relevant data on payments within the scope of PSP. Consider which information is currently being collected and what procedures need to be put in place to gather the additional information required. Also consider the necessary data verification procedures for PSP reporting. Similarly, safeguards should be established to ensure that only the required data is collected for reporting purposes in line with your GDPR responsibilities.
Affected PSPs must collect the relevant data and report to the tax authorities in the relevant Member States by 30 April 2024 in respect of the first reporting period (1 January 2024 to 31 March 2024).
PSPs that will fall within the scope of PSP reporting must begin to plan and create procedures to collate information about applicable payments.
PwC will host a webcast in early March, which will provide additional information and insights on PSP reporting.
We are ready to help you assess how the new legislation will affect your reporting requirements under PSP reporting. Contact us today.