Portugal steps up fight against VAT fraud in cross-border online shopping
The EU directive is three years old and was transposed into national law just a few days before the deadline set by the Council of the European Union.
Portugal has just transposed into its legal system an EU directive that strengthens the fight against VAT fraud in e-commerce when it comes to cross-border transactions that can increase the risk of companies failing to comply with their tax obligations.
From January, companies providing payment services will be obliged to keep “sufficiently detailed records and to report certain cross-border payments determined as such by the location of the payer and the payee”.
At issue is Council Directive (EU) 2020/284 of February 18, 2020 amending Directive 2006/112/EC on the introduction of obligations for payment service providers, as explained in the regulation published this Thursday in the Diário da República.
“The growth of e-commerce facilitates the cross-border sale of goods and services to final consumers in member states,” notes the text of the directive, clarifying that “cross-border e-commerce means a supply of goods or services in respect of which VAT is due in a member state, the supplier being established in another member state, a third territory or a third country”.
This reality is, however, often taken advantage of by “fraudulent businesses” that “exploit the opportunities offered by e-commerce to gain undue advantage in the market by evading their VAT obligations”.
Member states “need instruments to control fraudulent companies”
To prevent this from happening in cases where the principle of taxation at destination applies – and “since consumers have no accounting obligations” – member states where consumption takes place “need appropriate instruments to detect and control these fraudulent companies” that take advantage of the open doors in cross-border e-commerce.
However, in the vast majority of online purchases made by consumers in the European Union (EU), payments are made through providers of these financial services. “In order to provide payment services, the provider shall have specific information to identify the recipient or beneficiary of that payment, together with detailed information concerning the date and amount of the payment, the Member State of origin of the payment, as well as the fact that the payment was initiated at the merchant’s premises.”
Such “specific” information is very “important in the context of cross-border payments where the payer is located in one Member State and the payee is located in another Member State, a third territory or a third country,” the EU directive points out. This is information that “is necessary for the tax authorities of the Member States to be able to carry out their basic functions of detecting fraudulent businesses and controlling the VAT due”.
Payment service providers are therefore obliged to make this information available to the tax authorities “in order to help them identify and combat cross-border VAT fraud”.
It is also defined that the data should relate to transactions carried out in each calendar quarter and that they should relate “only to payment services provided in the context of cross-border payments”.
Furthermore, this obligation on payment providers only applies when more than 25 cross-border payments are made to the same payee in a calendar quarter. “If a payment service provider has information according to which the payee has several identifiers, the calculation is made per payee,” it is specified.
Records kept for three years
The records must be kept in electronic form by the payment service provider for a period of three years from the end of the calendar year in which the payment was executed.
In addition, they must also be made available to the payment service provider’s Member State of origin, or to the host Member States (when the provider works in Member States other than the country of origin). It is also established that the registers must contain information such as the BIC code (a standard format for company identification codes) of the payment service provider company as well as the payee, the name or company name of the payee, the VAT identification number or other national tax number of the payee and the IBAN (bank account number) and its address, among other data.
It is stipulated that these Community rules – drawn up three years ago by the Council of the EU – must be adopted and published by the member states by December 31, 2023, as well as the laws, regulations and administrative provisions necessary to comply with this directive.
These provisions will enter into force on January 1, 2024.