EC as regards introducing certain requirements for payment service providers - Main contents

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dossier	COM(2018)812 - Amendment of Directive 2006/112/EC as regards introducing certain requirements for payment service providers.
source	COM(2018)812
date	12-12-2018

1. CONTEXT OF THE PROPOSAL

• Reasons for and objectives of the proposal

In October 2017 ¹ , the Commission had already committed to address the administrative capacity of tax authorities to fight electronic commerce (hereinafter ‘e-commerce’) VAT fraud by improving cooperation with third parties. In the statement included in the minutes for the adoption of Council Directive (EU) 2017/2455 (the VAT E-commerce Directive) ² in December 2017, the Council stressed the need to improve anti-fraud tools ³ . The current initiative to fight e-commerce VAT fraud complements and paves the ground for a smooth application of the new measures introduced with the VAT E-commerce Directive in the context of the Commission’s Digital Single Market Strategy ⁴ .

In particular, the VAT E-commerce Directive introduced new VAT obligations for online marketplaces ⁵ and new simplifications to help businesses comply with VAT obligations for supplies of services, distance sales of goods and imports, including electronic VAT registration and VAT payment through the One Stop Shop (registration in one single Member States instead of in all the Member States of consumption). These measures will strengthen VAT compliance by simplifying the VAT system, but tax authorities still need to be able to detect and control fraudulent businesses. At present, this is a challenge for tax authorities. The European Court of Auditors ⁶ has remarked that the VAT legislation on e-commerce essentially relies on the willingness of businesses to voluntarily register and pay the due VAT. There are nevertheless limits to how Member States can use the current legal framework for administrative cooperation. If the above-mentioned compliance simplifications are not accompanied by anti-fraud measures, fraudsters will have little incentive to change their attitude and start complying with VAT obligations. Thus, the success of compliance measures in e-commerce also depends on the effectiveness of anti-fraud measures, which must be developed in parallel.

E-commerce has been growing rapidly in recent years, helping consumers to buy goods and services online. Consumers can choose between different suppliers, products and brands. They can also pay online in a trustful environment without moving from their computer or smartphone. 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.

The impact assessment attached to the present proposal identified three main cases of cross-border e-commerce VAT fraud: (i) intra-EU supplies of goods and services, (ii) imports of goods from businesses established in a third country or third territory (i.e. a country or territory outside the EU) to consumers in the Member States, and (iii) supplies of services from businesses established in a third country ⁷ to consumers in the Member States.

The total VAT loss within the Member States on cross-border supplies of goods is estimated at EUR 5 billion a year ⁸ . VAT fraud was also reported in cross-border supplies of services, namely in online television and digital games ⁹ . This fraud was documented by Europol and the European Union Intellectual Property Office in Europol’s latest report about illegal distribution of (and sales of access to) television broadcasts ¹⁰ . This fraud has also been documented by the television industry organisation Nordic Content Protection (NCP) ¹¹ . Online television distributors in Denmark, Finland and Sweden alone (these countries together have less than 10% of the EU’s total online television market in terms of revenues) ¹² estimate their annual loss of sales from illegal distribution at EUR 436 million. This amounts to approximately EUR 103 million in potential VAT losses ¹³ . These numbers (which will grow in parallel with the growth of e-commerce) show the urgent need to act to combat e-commerce VAT fraud. However, most tax authorities lack the tools and the sources of information to quantify the level of e-commerce VAT fraud ¹⁴ . In e-commerce VAT fraud, the internet allows fraudulent businesses to hide their own identity behind a domain name. Even when a tax authority is aware of the existence of a given online shop, the identity of the business behind it, its real location, or its turnover in that Member State often remain unknown. This represents a problem for tax authorities who might seek to start an investigation or initiate administrative cooperation at EU or international level. The Member States of consumption, where the VAT must be paid, most likely do not have any record or information to initiate an inspection. This is because the final consumers have no record-keeping obligations for their online purchases. Even if the latter was the case, it would be disproportionate to systematically have recourse to these final consumers to investigate VAT fraud by the seller.

Moreover, when the fraudsters and their location are unknown, it can become a real issue to know to which Member State a request for administrative cooperation should be addressed.

This could result in bulk identification requests. They would have to be sent either to a third party (i.e. the online market place or payment service providers) which could potentially hold the information, or they could be made to a tax authority of a country where the third party is established. Nevertheless, this would be considered disproportionate under Article 54(1) of Regulation (EU) No 904/2010. Furthermore, under Article 54(2) of the same Regulation, Member States cannot be required to provide information if their national legislation does not authorise them to collect it. This limits the possibilities for Member States to request third-party data from other Member States.

The present proposal seeks to solve the problem of e-commerce VAT fraud by strengthening the cooperation between tax authorities and payment service providers. In recent years, more than 90 % of online purchases by European customers were made through credit transfers, direct debits and card payments, i.e. through an intermediary involved in the transaction ¹⁵ (a payment service provider), and this is a trend that will continue in the future ¹⁶ . Third parties that hold payment information can therefore give a complete picture of online purchases to tax authorities to help them properly carry out their task of monitoring compliance with VAT obligations on e-commerce supplies of goods and services. The experience of the Member States that already cooperate with payment service providers at national level has shown that cooperation with payment service providers produces tangible results in fighting e-commerce VAT fraud ¹⁷ . Some third countries also use payment information as a tool for detecting non-compliant traders in combination with simplified collection regimes for cross-border B2C supplies of goods similar to the EU system ¹⁸ .

• Consistency with existing policy provisions in the policy area

This proposal complements the current VAT regulatory framework as recently modified by the VAT E-commerce Directive in the context of the Commission’s Digital Single Market Strategy. Furthermore, this initiative strengthens the administrative cooperation framework to better tackle e-commerce VAT fraud and restore fair competition. Fighting tax fraud and tax evasion to prevent distortion of competition and help secure national and EU revenues is a Commission priority. The political guidelines ¹⁹ of the present Commission called for greater efforts to be made to combat tax evasion and tax fraud, and in the State of the Union 2018 ²⁰ it is reiterated that the Commission is pursuing a far-reaching strategy to ensure that all companies, big and small, pay their fair share of tax.

Regulation (EU) No 2018/1541 ²¹ amending Regulation (EU) No 904/2010 on administrative cooperation and fighting fraud in the field of value added tax ²² creates new tools for administrative cooperation between Member State tax authorities. These tools will mainly be used to fight (i) so-called carousel fraud (carried out on B2B transactions); (ii) fraud involving the margin scheme applicable to second-hand cars; (iii) fraud exploiting specific customs regimes applicable to imports carried out by taxable persons (also on B2B transactions); and (iv) will allow joint actions between tax authorities (i.e. joint administrative enquires). Experts from tax authorities and businesses in the EU VAT Forum ²³ stress that the traditional form of cooperation to combat VAT fraud is based on records held by the businesses directly involved in the transaction chain. For cross-border B2C supplies, this information may not be directly available and thus ‘traditional’ cooperation between tax authorities is insufficient ²⁴ . Therefore, this initiative also complements the amendments most recently introduced to the EU administrative cooperation framework in the field of VAT, by giving tax authorities a new tool to detect VAT fraud on cross-border B2C supplies.

Finally, this initiative should also be seen in an international context. When fraud is committed by suppliers established in a third country or third territory, international cooperation is crucial for the enforcement of the missing VAT due. The Union has recently concluded an agreement for VAT cooperation with Norway ²⁵ and is active in the OECD to strengthen the use of administrative cooperation tools at international level. This initiative will give Member States the evidence to detect fraudsters in third countries. This evidence will be used as a first step to activate international cooperation or to contribute to the international dialogue on improving administrative cooperation with other jurisdictions.

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

• Legal basis

The legal basis for this initiative is Article 113 of the Treaty on the Functioning of the European Union (TFEU). This Article provides for the Council, acting unanimously in accordance with a special legislative procedure, to adopt provisions for the harmonisation of Member States’ rules in the area of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and functioning of the single market and avoid distortion of competition.

• Subsidiarity

This initiative is consistent with the principle of subsidiarity, as the main problem at stake, e-commerce VAT fraud, is common to all Member States and is exacerbated by the insufficient tools at the disposal of tax authorities. Member States alone are not able to obtain from third parties such as payment service providers, the information necessary to control VAT cross-border supplies of goods and services, ensure that the e-commerce VAT rules (as recently amended by the VAT E-commerce Directive) are correctly applied, and tackle e-commerce VAT fraud. Therefore, cooperation between the Member States is crucial. The legal framework for administrative cooperation between Member States in the field of VAT is laid down in Regulation (EU) No 904/2010. Therefore, any initiative to introduce new tools for cooperation targeted at this specific problem requires a proposal by the Commission to amend the existing EU legal framework. To allow tax authorities to collect VAT-relevant payment data, new record-keeping obligations for payment service providers must be introduced. This requires a proposal to amend the VAT Directive.

• Proportionality

This proposal does not go beyond what is necessary to meet the objective of fighting e-commerce VAT fraud. In particular, the new system is expected to provide tax authorities with the necessary information and resources to detect e-commerce VAT fraud and collect additional VAT. The administrative burden for businesses and tax authorities would be reduced overall compared to the present situation, and legitimate businesses would benefit from a more level playing field.

The requirement for payment service providers to keep a number of records to be sent to the tax authorities also complies with the principle of proportionality. Payment service providers will be required to keep records of data that are already at their disposal to execute the payment transactions. Furthermore, an EU-harmonised obligation for record keeping and transmission of data to tax authorities will limit the administrative burdens on payment service providers (compared to the burden of requiring these payment service providers to comply with diverging national approaches).

Fighting VAT fraud is an important objective of general public interest of the Union and of the Member States. Only the data necessary to achieve that objective (combating e-commerce VAT fraud) will be processed by the anti-fraud experts of tax authorities, in line with the General Data Protection Regulation ²⁶ , Regulation (EU) 2018/1725 ²⁷ and the Charter of Fundamental Rights ²⁸ . More precisely, the only data that will be processed are the data that allow the tax authorities to (i) identify the suppliers, (ii) verify the number of transactions and their monetary value, and (iii) verify the origin of the payments. Data on consumers are not included in the present initiative, apart from data on the Member States of origin of the payments (i.e. the Member State the consumers are located in). Proportionality is also ensured by a threshold below which the payment service providers do not have to send payment data to the tax authorities. The threshold would exclude from the present initiative and from the process of personal data those payments that most likely do not refer to economic activities.

• Choice of the instrument

A Directive is proposed in view of amending the VAT Directive to introduce new record keeping obligations for payment service providers.

A Regulation is proposed in view of amending the Regulation (EU) No 904/2010 on administrative cooperation and fighting fraud in the field of value added tax, to introduce a new database of VAT related payment data to be accessible by Member States only to fight e-commerce VAT fraud.

3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

• Ex-post evaluations

The current proposal is supported by an evaluation of Regulation (EU) No 904/2010, in particular its sections focusing on its use in the field of e-commerce VAT fraud.

In general, tax authorities considered the current Regulation (EU) No 904/2010 an effective tool to fight e-commerce VAT fraud. However, tax authorities mentioned that the tools for administrative cooperation currently at their disposal do not easily allow the identification and control of online businesses when these online businesses’ domain and bookkeeping records are in another country (regardless of whether that other country is a Member State of the EU or not). Tax authorities also stressed the need to increase the commitment of Member States to invest more resources into administrative cooperation, as this is a key factor in increasing the effectiveness of Regulation (EU) No 904/2010 in the fight against e-commerce VAT fraud. Finally, some Member States also mentioned that the effectiveness of the Regulation could be increased with new tools, such as access to - and exchange of - relevant payment information.

While the tax authorities considered that the tools laid down in Regulation (EU) No 904/2010 are relevant for fighting VAT fraud, they also stressed that there is room for improvement. In the view of tax authorities, the recent development of e-commerce and the large volumes of e-commerce transactions require new, more effective, and more efficient tools for administrative cooperation. Moreover, tax authorities said they expected that existing tools for fighting VAT fraud would become less relevant in the future due to changes in business models and changes in the patterns of VAT fraud.

Even though tax authorities generally lack quantitative evidence on the benefits and costs of administrative cooperation, they consider that the benefits of administrative cooperation are proportional to - or even higher than - the costs that tax authorities incurred in the exchange of information.

Regulation (EU) No 904/2010 and the current proposal contribute to the proper functioning of the single market. They are also consistent with the VAT E-commerce Directive rules. Nonetheless, Member State tax authorities recognised that the growth of e-commerce means they must deal with new challenges, such as how to process data for the detection of - and fight against - e-commerce VAT fraud.

Finally, both tax authorities and other stakeholders recognised the added value of the administrative cooperation framework laid down in Regulation (EU) No 904/2010, as e-commerce VAT fraud affects all Member States.

In conclusion, the evaluation showed that national anti-fraud measures are not sufficient to fight e-commerce VAT fraud and that administrative cooperation between Member States is necessary. It also showed that changes in e-commerce patterns require new and appropriate tools for the exchange of information.

• Stakeholder consultations

In 2017, the Commission sought the opinion of several stakeholders through a targeted consultation addressed to the tax authorities and to businesses, including payment service providers in particular. In 2017, a public consultation was also launched ²⁹ .

The results of the consultations confirmed that all stakeholders recognise e-commerce VAT fraud as a significant problem. Businesses stressed that e-commerce VAT fraud harms honest businesses by distorting competition. Both tax authorities and businesses in general confirmed that tax authorities need payment information to fight e-commerce VAT fraud. Data protection was not considered an impediment to the collection and exchange of payment information, provided that the personal data of the payers is processed under the conditions laid down by the General Data Protection Regulation.

Most respondents expressed a positive opinion on amending the EU regulatory framework to provide tax authorities with more effective anti-fraud tools. A centralised EU system to collect and exchange VAT-relevant payment information was considered the most cost-effective tool.

Both tax authorities and payment service providers confirmed the added value of a standardised and harmonised approach for the collection and exchange of payment information.

This proposal was drafted after consultation with Member State tax authorities and businesses representatives, including payment service providers, as part of the VAT Forum subgroup on e-commerce.

• Collection and use of expertise

Besides consulting all stakeholders, no outside experts were needed to draw up the current proposal.

• Impact assessment

1. In addition to the baseline scenario, the impact assessment considered two options:

(1)a non-regulatory option, basically consisting in providing guidelines to help tax authorities develop their administrative capacity to fight e-commerce VAT fraud;

(2)a regulatory option, implying the amendment of the EU legal framework (i) for the payment service providers to keep records of VAT-relevant payment information, and (ii) for the Member State tax authorities to collect and exchange the payment information.

Under the regulatory option, two alternative technical solutions were envisaged to make tax authorities exchange the payment information: a distributed application similar to the VAT Information Exchange System, or a central repository at EU level (to be developed by the Commission).

The impact assessment showed that a central repository was the option that best addressed the objective of fighting e-commerce VAT fraud.

A central repository would ensure the best tackling of VAT fraud. It would give more guarantees in terms of uniformity of data and data analysis, and would provide for a clearer EU-wide perspective of the turnover of detected fraudsters than decentralised repositories.

The exchange of information through a central repository would also better reduce market distortion. As cooperation leads to better results for tax authorities, legitimate businesses would enjoy a more level playing field. The stakeholder consultation did not allow for a precise quantification of the compliance costs for payment service providers. However, the impact assessment showed that the harmonisation of reporting obligations in one single format for the transmission of information (and one single interface) will reduce compliance costs for payment service providers.

Tax authorities would also have lower development and running costs under the centralised solution than they would with a decentralised system at national level.

The impact assessment for the proposal was considered by the Regulatory Scrutiny Board on 27 June 2018. The Board gave a positive opinion to the proposal with some recommendations that have been taken into account. The opinion of the Board and its recommendations are included in Annex 1 to the Staff Working Document for the impact assessment accompanying the proposal ³⁰ .

• Regulatory fitness and simplification

This initiative does not fall within the remit of the Regulatory Fitness Programme. The likely costs for tax authorities and the Commission are listed in Section 4.

The information received during the targeted consultation did not make possible any reliable quantification of costs for the payment service providers in the impact assessment. However, payment service providers currently receive information requests from different Member States in a variety of different formats and following different procedures. Under this initiative, the payment service providers would have to use an EU-harmonised standard for the transmission of payment information to the tax authorities of Member States. This would reduce the overall administrative burden on payment service providers.

The initiative does not provide for any new VAT obligations on the suppliers of goods and services to final consumers.

Finally, this initiative is expected to considerably reduce Member States’ VAT losses due to e-commerce VAT fraud.

• Fundamental rights

The proposal under consideration will trigger new exchanges and processing of VAT-related personal information.

The General Data Protection Regulation gives a wide definition of personal data, which includes any information on an identified or identifiable natural person who can be identified directly or indirectly. For this reason, payment information falls under its scope and the principles applicable for the protection of personal data as laid down in the Charter of Fundamental Rights.

The General Data Protection Regulation and Regulation (EU) 2018/1725 lay down very precise principles for how subjects’ rights must be complied with while processing personal data. However, the Union may use legislative measures to restrict these principles and the rights of the data subject ³¹ — as long as the restrictions respect the principles of necessity and proportionality — to safeguard important objectives of general public interest of the Union, such as economic and financial interests, including taxation ³² .

The impact assessment supporting this initiative showed that tax authorities have no other effective alternative way of collecting the necessary information to fight e-commerce VAT fraud. Therefore, the exchange of payment information is a necessary measure.

Furthermore, only payment information that is necessary to fight e-commerce VAT fraud would be processed under this initiative. The information that would be processed only refers to the recipients of funds (payees) and on the payment transaction itself (amount, currency, date), while information on the consumers paying for goods or services (payers) is not part of the exchange of information. Therefore, that information would not be used for other purposes, such as controlling purchase habits of the consumers. Furthermore, the proposal includes a ceiling linked to the number of payments received by a given payee, excluding the payments likely executed for private reasons. Domestic payments would also be excluded from the scope of the initiative. Finally, the payment information would only be available to the Eurofisc liaison officials of the Member States ³³ and only for the time necessary to fight e-commerce VAT fraud.

4. BUDGETARY IMPLICATIONS

It is expected that the investment costs of the Commission and of the tax authorities will be outweighed by the increase in VAT revenues collected. In fact, B2C online sales accounted for around EUR 600 billion in 2017 ³⁴ . Therefore, assuming that tax authorities would be able to assess a VAT loss corresponding to 1% of that turnover, this would generate up to EUR 1.2 billion in VAT at EU-28 level. Even accounting for incomplete recovery of assessed VAT, these amounts would far exceed the overall operational costs for the initiative. Furthermore, fraud levels account for several percentage points of e-commerce sales. As a result of the increased collection of VAT, it is expected that the VAT gap will be reduced in the e-commerce sector.

The costs of this initiative will be spread among several years starting in 2019. The first part of these costs (until 2020) will be covered by existing allocations in the current Fiscalis 2020 programme. The majority of the costs will nevertheless take place after the year 2020, as described in the Legislative Financial Statements.

Taking into account the highest possible costs incurred by the Commission, the budgetary implications have been estimated to a one-off cost of EUR 11.8 million for setting-up the system, and an annual running cost of EUR 4,5 million once the system is fully operational. It was estimated that these running costs would only start in 2022 once the system is operational. Their impact on the budget was calculated over a five year period for a total (including the one-off cost) of EUR 34,3 million to set-up and run the system until 2027.

These costs are consistent with the MFF proposal and the Fiscalis programme for the next period.

5. OTHER ELEMENTS

• Implementation plans and arrangements for monitoring, evaluation and reporting

The Eurofisc reports and the annual statistics of the Member States are presented and discussed in the Standing Committee on Administrative Cooperation ³⁵ in accordance with Article 49 of Regulation (EU) No 904/2010. The Standing Committee is chaired by the European Commission. In addition, the Commission will seek to obtain from Member States any relevant information on the functioning of the new system and on fraud. Where relevant, coordination will be ensured within the Fiscalis Committee (this committee has still not yet been set up under the new Fiscalis programme ³⁶ ).

Regulation (EU) No 904/2010 and Directive 2006/112/EC already lay down rules for periodic Commission evaluations and reporting. Therefore, in line with these existing obligations, every 5 years, the Commission will report to the European Parliament and the Council on the functioning of the new administrative cooperation tool, pursuant to Article 59 of Regulation (EU) No 904/2010.

Furthermore, every 4 years the Commission will report to the European Parliament and the Council on the operation of the new VAT obligations imposed on payment service providers pursuant to Article 404 of Directive 2006/112/EC. The Commission will ensure that the two reports are coordinated and built on the same findings.

• Detailed explanation of the specific provisions of the proposal

In Article 243a the definitions refer to the relevant provisions of Directive (EU) 2015/2366 ³⁷ (PSD2) on payment services in the internal market.

Article 243b of the VAT Directive introduces a new record-keeping obligation for payment service providers. These payment services are set out in Annex 1 of PSD2. Not all payment services are relevant for the control of cross-border supplies of goods and services. The only payment services that are relevant are those that result in a cross-border transfer of funds to the payees ³⁸ (or to the payment service providers acting on behalf of the payees) and only when the payer ³⁹ is located in one of the Member States. This is because the Member State of origin of the payment gives an indication to the tax authorities about the place of consumption. Under this initiative, the ‘cross-border’ concept refers to transactions where the consumer is in a Member State and the supplier is in another Member State or in a third country, or in a third territory. Domestic payments are not included in the scope of this proposal.

Article 243b does not refer to the place of establishment or to the permanent address or usual residence of the payee and payer. In fact, payment service providers are third parties compared to the contractual relation between the taxable persons supplying goods and services and their consumers. For this reason, the information available to payment service providers when they execute payment services does not necessarily match with the information taxable persons have on their consumers or with the information necessary to establish the place of taxable transaction. The location only triggers the record-keeping obligation of payment service providers pursuant to Article 243b.

The rules to determine the location of the payees and of the payers are laid down in the proposed article 243c (see infra).

In order to capture only the payments that are potentially linked to an economic activity (thus excluding cross-border fund transfers executed for private reasons) a ceiling linked to the number of cross-border payments received by a payee is provided for. Only when the total amount of payments received by a given payee exceeds the ceiling of 25 payments in a calendar quarter (that is also the reporting period for payment service providers) will the payment service provider have to keep records on that payee available to tax authorities. The ceiling was decided by taking into account an average value of online shopping orders of EUR 95 ⁴⁰ . 100 payment transactions per year of that value every year will result in almost EUR 10 000 in sales, which can already give rise to VAT obligations in the Member States. This amount also matches the EUR 10 000 threshold on intra-EU supplies introduced by the VAT E-commerce Directive.

The record-keeping period for the payment service providers would be 2 years. This record-keeping period is proportionate, considering the massive volume of information at stake, its high sensitivity in terms of data protection and the time necessary for tax authorities to detect VAT fraud.

Article 243c, refers to the rules that payment service providers must apply to determine the location of the payers and payees as mentioned before. Article 243c does not lay down rules to establish the place of taxation, but instead lays down rules to establish the location of the payee and payers so as to apply the record-keeping obligation pursuant to Article 243b of the VAT Directive.

Furthermore, Article 243c does not imply the transmission of the information used to determine the location of the payer to the tax authorities. This information will remain with the payment service provider.

Pursuant to paragraph 1, the location of the payer will be considered as being in the Member State indicated by the identifier of the account of the payer. The Single Euro Payments Area Regulation ⁴¹ establishes the IBAN (International Bank Account Number) as the identifier of an individual payment account in a Member State. If a payment is executed through a payment service not falling under the Single Euro Payments Area Regulation (which only applies to credit transfers and direct debits in euro), the location of the payer may be given by any other identifier of the payment account of the payer.

There are also payment transactions (i.e. money remittance) where the funds are transferred to the payee without any payment account being created in the name of the payer. In this case, the location of the payer will be considered as being in the Member State indicated by the identifier of the payment service provider acting on behalf of the payer.

Pursuant to paragraph 2, the location of the payee (the beneficiary of the funds) will be considered as being in the Member State or third country indicated by the identifier of the payment account where the funds are credited. Should the funds not be credited to any payment account, then the location of the payee will be considered as being in the Member State, third country or third territory indicated by the identifier of the payment service provider acting on behalf of the payee.

Article 243d provides the details of the information to be kept by the payment service providers referred to in Article 243b. The records contain information to identify the payment service provider keeping the records, information to identify the payee, and information on the payments received by the payee. The identification information of the payers is not included in the record-keeping obligation of the payment service providers as it is not necessary to detect fraud. Furthermore, payment service providers are not always aware of whether the payers are taxable persons or merely private consumers. Therefore, when the threshold of 25 payments in a quarter is exceeded, the payment service providers will have to keep information referring to all payments received by a given payee, without distinguishing between payments received by consumers or taxable persons. This distinction will be a task of the Member State tax authorities when they analyse the information.

The payment service providers must keep records of any VAT or tax identification number of the payee if applicable. VAT identification numbers (national or Mini One Stop Shop identification numbers) are necessary for the tax authorities of the Member States to identify VAT taxable persons and cross- check their payment information with the respective VAT or MOSS declarations and payments. The VAT identification of the payee may not be available to the payment service providers (either because the payee does not have a VAT identification number or because the payee has a VAT identification number but does not communicate it to the payment service provider). In case a VAT identification number is not available to the payment service providers, the tax authorities will have to activate the necessary procedures (domestic or using administrative cooperation) to find out whether behind the given payee there is a taxable person and to assess whether there are VAT liabilities.

Finally, the payment service providers must keep information on the payment transaction itself, such as the amount, currency, date, origin of the payment and indication of any payment refund.