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Central Electronic System of Payments
The Central Electronic System of Payments (CESOP) regime is an automatic exchange of information regime being introduced in the European Union from 1 January 2024. The rules were introduced by Council Directive 2020/284, amending the EU's Value-added tax Directive.
The rules were introduced to tackle VAT fraud by requiring all payment service providers (PSPs) as defined under the EU Payment Services Directive (PSD2) to report on cross-border payments which originate in the EU. To separate business payments from personal transfers, PSPs are only required to report on payments where they know that the recipient has received more than 25 payments in a quarter.
The reporting is expected to result in data sharing on 8 billion payment transactions per year, covering credit transfers, direct debit, credit and debit cards, as well as e-money and transactions by digital platforms actings as PSPs. The information shared includes transaction level detail, as well as information related to the identification of the recipient.
The regime has similarities to Australia's business transactions through payment systems, reporting and the United States' Form 1099-K reporting obligations, although unlike other exchange of information regimes there is no current OECD initiative to allow for information to be shared between those countries or others with similar regimes.
The rules were first proposed by the European Commission in 2018, to tackle the perceived growth in tax evasion resulting from the growth of the digital economy and e-commerce. In their proposal, the Commission estimated that the cost of VAT lost annually to fraud to be €5 billion, and noted that:
"Suppliers have changed their business models to benefit from e-commerce and sell their products to consumers globally without the need for a physical retail presence. However, this opportunity is also exploited by fraudulent businesses to gain an unfair market advantage by not fulfilling their VAT obligations."
A BBC report which was referred to by the EU Commission indicated that the UK alone was losing £1 billion a year to cross-border VAT fraud.
In the impact assessment accompanying the Directive, the Commission estimated that they would receive reports on 8 billion payment transactions annually, and the resultant file would be around 10 terabytes of data for each calendar year. A European Banking Authority report issued in 2022 indicated that there are around 46 billion cross-border transactions within the EU each year.
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Central Electronic System of Payments
The Central Electronic System of Payments (CESOP) regime is an automatic exchange of information regime being introduced in the European Union from 1 January 2024. The rules were introduced by Council Directive 2020/284, amending the EU's Value-added tax Directive.
The rules were introduced to tackle VAT fraud by requiring all payment service providers (PSPs) as defined under the EU Payment Services Directive (PSD2) to report on cross-border payments which originate in the EU. To separate business payments from personal transfers, PSPs are only required to report on payments where they know that the recipient has received more than 25 payments in a quarter.
The reporting is expected to result in data sharing on 8 billion payment transactions per year, covering credit transfers, direct debit, credit and debit cards, as well as e-money and transactions by digital platforms actings as PSPs. The information shared includes transaction level detail, as well as information related to the identification of the recipient.
The regime has similarities to Australia's business transactions through payment systems, reporting and the United States' Form 1099-K reporting obligations, although unlike other exchange of information regimes there is no current OECD initiative to allow for information to be shared between those countries or others with similar regimes.
The rules were first proposed by the European Commission in 2018, to tackle the perceived growth in tax evasion resulting from the growth of the digital economy and e-commerce. In their proposal, the Commission estimated that the cost of VAT lost annually to fraud to be €5 billion, and noted that:
"Suppliers have changed their business models to benefit from e-commerce and sell their products to consumers globally without the need for a physical retail presence. However, this opportunity is also exploited by fraudulent businesses to gain an unfair market advantage by not fulfilling their VAT obligations."
A BBC report which was referred to by the EU Commission indicated that the UK alone was losing £1 billion a year to cross-border VAT fraud.
In the impact assessment accompanying the Directive, the Commission estimated that they would receive reports on 8 billion payment transactions annually, and the resultant file would be around 10 terabytes of data for each calendar year. A European Banking Authority report issued in 2022 indicated that there are around 46 billion cross-border transactions within the EU each year.