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New transparency rules have come into force from 1 January 2024 to help EU Member States fight value added tax (VAT) fraud, Agerpres reports.
According to a press release from the EU executive, the new rules will provide EU Member States' tax administrations with payment information that will enable them to detect VAT fraud more easily, with a particular focus on e-commerce, a sector highly prone to non-compliance and fraud of this kind. This, in turn, creates gaps in the tax revenue from which vital public services are paid. For example, some online sellers who are not physically present in an EU Member State sell goods and services to EU consumers without registering for VAT anywhere in the EU or by declaring less than the actual value of their online sales. Member States therefore need strengthened tools to detect and stop this illegal behaviour.
The new system reinforces the key role played by payment service providers (PSPs), such as banks, e-money institutions, payment institutions and post office giro services, which together facilitate over 90% of online purchases in the EU.
From 1 January, these PSPs will have to monitor cross-border payees and, from 1 April, they will have to report to EU Member States' administrations on those who receive more than 25 cross-border payments per quarter. This information will then be centralised in a new European database developed by the European Commission, the Central Electronic System of Payment Information (CESOP), where the information will be stored, aggregated and cross-checked with other data.
All CESOP information will then be made available to Member States through Eurofisc, the EU network of anti-VAT fraud specialists launched in 2010. This will make it much easier for Member States to analyse the data and identify online sellers who do not comply with VAT obligations, including businesses not located in the EU. Eurofisc liaison officers are also empowered to take appropriate action at national level, such as requesting information, carrying out audits or cancelling VAT numbers. Similar provisions already in place in some Member States and other countries have had a tangible effect on the fight against e-commerce fraud.
