August 18, 2023
Luxembourg enacts new reporting regime to combat VAT fraud
On 2 August 2023, the Law of 26 July 2023 transposing Council Directive (EU) 2020/284 of 18 February 2020, amending Directive 2006/112/EC as regards introducing certain requirements for PSPs (CESOP Law), was published in the Official Journal of the Grand-Duchy of Luxembourg.
These new rules are set to combat VAT fraud by enabling national tax authorities to carry out controls. This means that with the CESOP Law, all PSPs providing payment services in the EU will be required, starting on 1 January 2024, to record and disclose transactional data on cross-border payments that fall within the scope of the obligations defined in the CESOP Law.
The data collected by the various EU Member States will then be exchanged among the concerned Member States and centralized in the CESOP database.
This data exchange will enable tax authorities to detect possible VAT fraud by: (i) identifying sellers behind websites or marketplaces, (ii) collecting data in a harmonized standard format, and (iii) centralizing all information in the CESOP database to be reconciled at the European level.
What is the scope of the CESOP Law?
According to the CESOP Law, PSPs providing payment services within the EU will be required to report payments on a quarterly basis when all the following criteria are met:
In general, the CESOP report filing will have to be completed separately in each EU Member State where the PSP provides payment services.
The submission of the report should be made electronically and in a specified XML format, defined locally by each relevant tax administration. For each quarter, the CESOP reporting deadline will be one month after the end of the quarter.
The deadline for the first reporting is 30 April 2024 regarding the in-scope payments performed during the first quarter of 2024.
What challenges does the new CESOP Law entail?
The new CESOP requirements bring challenges to PSPs3, affecting most functions of the organizations, including:
The requirement for CESOP reports to be submitted in each EU Member State where the PSP provides payment services can quickly become a complicated and time-consuming exercise. To ensure readiness by 1 January 2024, PSPs must not delay their CESOP impact assessments and implementation projects.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Tax Advisory Services S.à r.l.
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor
1 Amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (PSD2).
2 See EY Luxembourg article of 27 October 2022: EU introduces new VAT reporting obligations as of 1 January 2024.
3 See EY Luxembourg brochure on CESOP: Luxembourg CESOP brochure.