EU rules set to transform VAT fraud detection in e-commerce come into effect from 1 January 2024.
From 1 January 2024, payment service providers (PSPs) offering payment services in the EU will be required to monitor the payees of cross-border payments. PSPs will be required to provide to the tax administrations in member states information of any business that receives more than 25 cross-border payments per quarter.
The information provided will be stored in a centralised EU database, the central electronic system of payment information (CESOP), where it can be cross-checked against other European databases. The information in CESOP will be made available to anti-fraud experts in EU member states and Norway.
The new rules and CESOP system should give tax authorities in member states the necessary tools to detect e-commerce VAT fraud carried out by sellers established in another EU member state or in a non-EU country, such as the UK.
According to the FAQ document published by the European Commission, PSPs located in Northern Ireland are considered as established in a third country. This means that PSPs in Northern Ireland are not subject to the reporting obligation. However, payments to payees located in Northern Ireland must be reported by the payer’s PSP, where that PSP is located in a member state.
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