New EU rules on cross-border payments in force 1 January

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(BRUSSELS) – New transparency rules on cross-border payments designed to help EU Member States’ tax administrations crack down on Value-Added Tax (VAT) fraud came into force on 1 January.

Payment service providers (PSPs) such as banks, e-money institutions and other payment institutions collectively handle over 90% of online purchases in the EU.

As of 1 January, PSPs have to monitor the payees of cross-border payments and, as of 1 April, transmit information on those who receive more than 25 cross-border payments per quarter to the administrations of EU Member States. The information will be centralised in a new European database developed by the European Commission, the Central Electronic System of Payment information (CESOP), where it will be stored and cross-checked with other data.

The new rules will provide tax administration of the Member States with payment information allowing them to detect VAT fraud more easily, with a particular focus on e-commerce which is particularly prone to VAT non-compliance and fraud. This in turn creates holes in the tax revenues that pay for vital public services.

An example is where some online sellers with no physical presence in an EU Member State sell goods and services to EU consumers without registering for VAT anywhere in the EU, or by declaring less than the actual value of their online sales.

“These new rules will play a crucial role in the fight against VAT fraud, which costs EU governments billions in lost revenues every year,” said the Economy Commissioner Paolo Gentiloni: “By harnessing the information collected by payment service providers such as banks and credit card companies, anti-fraud specialists in Member States will be able to more easily and accurately pinpoint and crack down on fraudulent behaviour in the e-commerce sector.”

Central Electronic System of Payment information (CESOP)

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