European PSPs to Collect Tax Identification Numbers from 1 January 2024
EU Directive 2020/284 introduced new record-keeping and potential reporting obligations on European payment service providers (PSPs) effective 1 January 2024.
The Council of the European Union adopted Regulation (EU) 2020/283 and Directive (EU) 2020/284, under which PSPs will be obliged to share payment data of cross-border transactions with the tax authorities under certain conditions.
What are the rules and how do they apply?
The Directive requires PSPs to keep records of data on cross-border payments and make them available to their local tax authorities. The aim is to help them detect and combat cross-border VAT fraud by strengthening the cooperation between tax authorities and PSPs. As the problem of VAT fraud affects all EU Member States and the fight against VAT fraud with cross-border elements cannot be sufficiently tackled by the Member States alone, the Council has taken the view that this can be better achieved at an EU level.
Who needs to oblige?
The Directive applies to PSPs that are located in a European Union Member State, which is determined based on the business identifier code (BIC) or any other business identifier code that precisely identifies the PSP and its location.
The Directive applies only to those payment services that result in cross-border transfer of funds, where the payer is located in one of the Member States, and the payee is located in another Member State or a third country.
The Directive requires PSPs to keep records only for cross-border payments likely to involve economic activity. Therefore, a threshold has been introduced: the record-keeping obligation is triggered as soon as the PSP provides payment services for more than 25 cross-border payments in a calendar quarter to the same payee, regardless of the transaction amount.
What data needs to be stored?
The new Article 243d, added to the EU VAT Directive (2006/112/EC) provides the details of the information to be kept by PSPs, which include, but are not limited to the following:
- the name and address of the payee;
- identifier of payee's location ( e.g. IBAN);
- VAT identification number or another national tax number of the payee;
- transaction date, amount, and currency.
The record-keeping period for PSPs is three calendar years.
How can Fonoa help?
If you are a PSP, it is advisable to keep your eye on the upcoming developments and consider how your systems might be able to comply with the new regulation. We can assist you with our Lookup solution that syncs with VIES and national databases across the globe, validating VAT identification numbers or other national tax identification numbers in 80+ countries. Using this solution, you can ensure that you collect, record, and report valid numbers to the tax authorities that indeed belong to the correct payees.
We are following updates closely. Member States have until 31 December 2023 to implement the Directive into national law. The new rules will enter into force on 1 January 2024. Further clarification and guidelines are expected from the Member States on the exact data to be recorded and the technical requirements.