With effect from 1 January 2024, an amendment to Act No. 235/2004 Coll., on Value Added Tax, will establish new obligations for payment service providers. They will have to newly record and report data on cross-border payment transactions. The aim of the Central Electronic System for Payment Information (CESOP) is to reduce the growing gap between reported and uncollected VAT within the EU. Who is affected by this obligation? Which transactions will be reported? And which data to keep? All about the new obligation can be found in this article.
The Financial Administration has already published information on the forthcoming changes to CESOP on its website. The bill is based on a Council (EU) Directive and the amendment is currently before the Chamber of Deputies for its third reading (state of procedure (CS only)).
Payment service providers in the EU will now be obliged to record and report data on cross-border payment transactions (see the Payment Services Directive (Directive (EU) 2015/2366 of the European Parliament and of the Council, PSD2). A payment service provider in relation to CESOP refers to persons authorised under the law governing payment transactions to provide a recorded payment service, with the exception of the Czech National Bank. It will thus apply to credit institutions, which include banks as well as electronic money providers, postal transaction services and payment institutions, including those that benefit from the small payment institutions (SPIs) exemption.
The submission of data notifications for CESOP purposes will be enabled electronically via Moje daně (My Taxes) portal. According to the information of the Financial Administration, on 16 October 2023 the testing of the submission of data notifications for CESOP purposes was launched for interested payment service providers.
The submission of the notification shall be made on a quarterly basis, always no later than the last day of the following month after the end of the relevant calendar quarter.
In relation to the introduction of this new obligation, we have noted a number of disputable issues, e.g. who exactly will be subject to the obligation, or how to correctly identify a cross-border payment or how to determine the number of transactions that need to be recorded. A number of entities are authorised by the Czech National Bank to provide payment services (e.g. e-money institutions or agents of payment service providers) and it is not entirely clear to determine, without knowing how their specific business models work and how they arrange payments, whether they will be affected by the new obligations. Below, we briefly summarise the background information on CESOP.
CESOP is a new central EU electronic payment information system created by the European Commission with the objective to reduce the growing gap between reported and uncollected VAT within the EU. Available EU analyses show that uncollected VAT is largely related to sales of goods made by foreign e-shops within the EU. If an e-shop evades VAT registration in the EU, it sells goods without VAT, which is subsequently missing from the EU budget. The CESOP system will, among other things, allow cross-checking of payment data with information on the VAT status of the payment recipient and retain the information for the time necessary for tax authorities to perform VAT checks.
The new obligation applies to all cross-border payments where the payer is located in the EU. A cross-border payment is defined as a payment transaction that goes from a payer in one EU Member State to a recipient in another EU Member State or from a payer in one EU Member State to a recipient in a third country. Any payment service provider in the EU that processes a cross-border transaction must keep and report well-defined payment data. Cross-border payments from a third country to an EU Member State are not subject to the reporting obligation.
For the purposes of recording payment transactions, the country of establishment of the payer or recipient shall be deemed to be the country corresponding to the IBAN identifier of the payment account or other identifier which clearly identifies their place of establishment. In the absence of such an identifier, the country of establishment shall be determined on the basis of the bank identification code (BIC) or similar identifier which uniquely identifies the payment service provider or similar provider under the law of another country acting on behalf of the payer or recipient.
A registered payment service provider shall be obliged to keep records of cross-border payments and their recipients on condition that it provides more than 25 payments to one recipient during one calendar quarter.
In terms of recording cross-border payments and their recipients, the Specialised Tax Office is the tax administrator.
Depending on the characteristics of the transaction, the reporting payment service provider must include the following data elements in the CESOP report:
If you are unsure whether the new obligation applies to you, or if you would like advice on how to maintain and report data correctly, please do not hesitate to contact us and we will be happy to assist you. For more information on all our tax services, please visit our website.
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