New rules set to combat VAT fraud - records of cross-border payments
An amendment to the Value Added Tax Act (hereafter the ‘Amendment’) is being discussed in the Chamber of Deputies which in connection with the related EU legislation introduces a new record-keeping and reporting obligations for payment service providers (hereinafter ’PSPs’). From 1 January 2024, PSPs will be required to keep records on cross-border payments and their recipients and provide them to the tax authorities.
The aim of the Amendment is to introduce an effective tool to help prevent VAT fraud, especially in the in the field of increasingly popular distance selling as control mechanisms have not been practically implemented in this area so far.
The obligation to keep records of cross-border payments applies to all PSPs providing payment services in the Czech Republic. In practice, this will mainly concern banks, credit and other e‑money institutions. In particular, payments received from another EU Member State and payments made to a third country are to be recorded. The data collected by EU Member States will then be shared between them and centralized in Central Electronic System of Payment Information, the so-called CESOP.
The obligation to keep records of cross-border payments will be triggered as soon as PSPs identify more than 25 cross-border payments to the same payee in a calendar quarter, regardless of the amount of each payment.
The following data shall be subject to record-keeping and reporting obligation:
- BIC code or other similar identifier;
- The name or title of the payee;
- VAT identification number of the payee, if assigned;
- The payee's address;
- The location identifier of the payee, e.g. IBAN or other identifiers; and
- The date, time, currency and amount of each transaction.
The declarations will be submitted electronically to the tax administration in the defined format by the end of the month following the end of the calendar quarter. The records of cross-border payments will need to be stored for at least three calendar years. The first deadline for the declaration will therefore be by 30 April 2024.
Authors:
Petr Drahoš, Senior Tax Manager
Veronika Soukupová, Tax Manager
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