A new reporting challenge for PSPs: getting ready for CESOP
The financial sector is about to face a new reporting obligation / compliance challenge related to CESOP (Central Electronic System of Payment information). It aims at detecting possible e-commerce VAT fraud, in the context of cross-border transactions. It therefore consists in reporting some of these transactions to National Tax Administrations.
Who’s falling in the scope?
On February 18th, 2020, the Council of the EU adopted a “legislative package to request payment service providers to transmit information on cross-border payments originating from Member States and on the beneficiary (“the payee”) of these cross-border payments”.
Concretely, it means that Payment Service Providers (PSPs) that offer payment services in the EU will have to monitor cross-border payments and submit information on a quarterly basis to the administrations of the Member States when those transactions meet certain conditions.
The CESOP regulatory deadline is approaching: all European PSPs will have to comply by January 1st, 2024, and submit their first report at the latest one month after the end of the first quarter 2024.
As explained in the Taxation and Customs section of the EC’s website, “this information will then be centralized in a European database, the CESOP, where it will be stored, aggregated and cross-checked with other European databases. All information in CESOP will then be made available to anti-fraud experts of Member States via a network called Eurofisc.”
This framework which aims at fighting VAT fraud, will have an impact on many organizations: PSPs – whether credit institution, EMI, Payment Institution, etc. – will have to submit their CESOP report to potentially several National Tax Administrations (NTA), in a specific structure and well-defined format.
The CESOP framework comprises two main elements and stages:
- PSPs will first have to report to their NTA (and to several NTAs if they offer payment services in multiple EU countries) every three months. In Luxembourg, PSPs will have to report to the AED (Administration de l’Enregistrement, des Domaines et de la TVA).
- NTAs will then transfer this report to the central CESOP system in the next 10 days.
Moreover, CESOP will send back validation messages, with constructive feedback, requiring PSPs to correct the reports in some cases.
What types of transaction data should be transmitted? And how?
Last August, the European Commission published the “Guidelines for the reporting of payment data from payment service providers and transmission to the CESOP”, notably highlighting which types of data should be reported, and what the appropriate format is. The guidelines underline that “this data has to be transmitted via a standard XML form”.
Find below a list of the different data fields that will have to be transmitted to the NTAs.:
- BIC/ID reporting PSP
- Payee name
- Payee VAT/TIN
- Payee account ID
- BIC/IDC Payee PSP
- Payee address
- Refund
- Date/time
- Amount
- Currency
- MS origin payment
- MS destination refund
- Payer location information
- Transaction ID
- Physical presence
Some of these fields might be mandatory or not, depending on whether we talk about credit transfer, direct debit, or money remittance, card payments, e-money, or marketplaces. For more information, please refer to the said guidelines.
Moreover, the European Commission just published its CESOP Q&As, available on its website.
How can LUXHUB support PSPs in this new compliance journey?
By capitalizing on our extensive knowledge in payment and compliance, LUXHUB is well equipped to support PSPs in this upcoming regulatory/compliance challenge. Our goal is to enable the efficient preparation of the requested file, between you, as PSP, and your local NTA.
The LUXHUB-powered CESOP compliance solution will enable Payment Service Providers to:
- Filter and convert cross-border transactions data file,
- Use a web interface to edit/correct the CESOP reporting file before submission to the NTA,
- When possible, automate the transfer of the CESOP reporting file to the National Tax Administration,
- Manage efficiently the CESOP feedback file and corrections.
Two different deployments, either on-premises or as managed services, will be available for PSPs to accommodate their compliance needs.
By leveraging our payment and compliance expertise we developed through our recognized PSD2 and CEDR solutions, we firmly believe that we can become your trusted CESOP partner and would be glad to discuss our upcoming offer
Claude Meurisse, CEO, LUXHUB