Biggest challenge with CESOP is “step zero”: getting ready to report
With the first deadline for the Central Electronic System of Payment information (CESOP) reporting fast approaching, financial industry experts during an Allen & Overy and LUXHUB event in Luxembourg talked about major challenges and things to keep in mind when it comes to this new regulation.
New transparency rules are now in place to help EU countries crack down on VAT fraud, with payment service providers now obligated to monitor the beneficiaries of cross-border payments. The reported information will be centralised in a European database–the Central Electronic System of Payment information (CESOP)–where it will be “stored, aggregated and cross-checked with other European databases,” said the European Commission.
With the deadline for the first round of reporting on 30 April 2024, payments regulation experts at an Allen & Overy and LUXHUB event on 18 April discussed key challenges and points to consider when preparing for CESOP.
Lack of clarity of the regulation
For panellist Jean-Luc Barbier from the Banque Internationale à Luxembourg, CESOP preparation came in the midst of a major transformation of the bank’s IT systems, making their first challenge “a lack of resources,” said Barbier. In October of last year, for instance, BIL experienced several issues with payments, making it “quite difficult to mobilise payment experts.”
“The second challenge was the complexity to extract data,” continued Barbier, while a third challenge was something facing many entities in Luxembourg: “a lack of clarity of regulation, especially at the beginning.” There were many outstanding questions, like whether to report to all national tax authorities (NTAs) or just to Luxembourg.
Location, location, location
Indeed, the lack of clarity was a key question for many players, added Adam Obadia, a banking associate at Allen & Overy and moderator of the panel. Following discussion with stakeholders, “we realised that one of the main issues is the location,” whether that was the “location of the payment service user or the location of where the payment service is provided.” This information is important when it comes to submitting data to the relevant tax authorities.