CESOP is the European Union’s Central Electronic System of Payment Information.

CESOP is a new measure established by the European Commission to tackle the VAT gap in the EU. This “VAT gap” refers to VAT revenue lost due to errors and fraud. CESOP will help the EU recover previously uncollected VAT by collecting data on cross-border payments.

Overview

The CESOP obligations form part of a larger EU e-commerce Value-Added Tax (VAT) package designed to modernise current cross-border VAT procedures and to identify non-compliant businesses. The most important elements introduced to date include the VAT One-Stop-Shop (OSS) and VAT Import One-Stop-Shop (IOSS).

Who is within scope?

Banks, electronic money institutions and other regulated payment institutions. All cross-border payments where the payer is in the EU are affected. Any EU PSP processing a cross-border transaction needs to keep and report certain payment data. A relief applies to the payer’s EU PSP if the payee’s PSP is also in the EU.

Payment methods within the scope of the requirement

The types of payment methods that are subject to the reporting requirement are:

• Card payments (debit and credit cards).
• Bank transfers.
• Direct debit payments.
• E-money payments.
• Money remittances.

Payment transactions to be reported

These reported payment transactions and payee details only apply to payees receiving more than 25 cross-border payments per calendar quarter.

In addition, the payer must be based in an EU Member State and the payee based in:

• Another Member State.
• A third territory of the EU.
• A third country.

PSPs only need to report to tax administrations cross-border payments to payees that may constitute a commercial activity.

How to register

Registration for CESOP is done through either Revenue Online Service (ROS) or the Non-Residents Registration (NRR) application. All filing for CESOP will be conducted through ROS.

Record-keeping obligations

PSPs must keep detailed records of payees and payments made about the payment services provided. The records must be retained electronically for three calendar years from the end of the calendar year of the payment date.

Central Electronic System of Payment Information (CESOP) database

All tax administrations send the data to a centralised European Union database, CESOP and make it available to designated staff within each tax administration to ensure that the correct amount of VAT is remitted in each Member State.

Where does the PSP report?

A PSP is required to make a return to every Member State where it provides services falling within the scope of the reporting obligation.

For example, a PSP established in Belgium may provide payment services to payees in Belgium, France and the Netherlands. In such cases, the PSP will need to submit returns in each of these three countries.

How to submit a return?

Returns must be made electronically by each PSP in a specified XML format.

For more information on how to register for PSP, please see the Tax and Duty Manual (TDM) . This TDM also provides an overview of the filing process and technical filing requirements for CESOP reporting in Ireland.

If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Forvis Mazars corporate tax team below: