Starting January 1st, 2024, payment processors in Europe took on a new responsibility: reporting specific details about certain digital asset cross-border payments. This information goes to tax authorities, who then send it to the European Commission for storage in a central database called the Central Electronic System on Payment Information (CESOP).

Why create CESOP? Two main goals:

Curb VAT fraud: By tracking cross-border transactions, authorities can better identify potential offenders and crack down on VAT evasion.

Level the playing field: Increased transparency ensures fair competition between businesses by making it harder for some to hide income and gain an unfair advantage.

Payment Service Providers (PSP) means:

• Credit institutions, a category that includes, for example, fully authorized banks that are established in Europe, as well as European branches of credit institutions that have their headquarters outside the EU and that provide payment services.
• Electronic money issuing institutions, a category that includes all payment service providers that provide payment services in electronic money, for example, issuers of electronic wallets and issuers of value coupons (vouchers)/electronic cards.
• Payment institutions, a residual category that can include all companies that provide payment services and that do not meet the criteria for inclusion in any of the other categories listed above. This category may include businesses that provide payment services, such as issuing credit/debit cards, accepting payment transactions, processing payments, initiating payments or platforms, that provide payment services and act both on behalf of the payer and the account of the payee, etc.
• Postal transfer institutions that provide payment services.

Targeted payment services

Only payment service providers that provide the following payment services are subject to the reporting obligation:

• Execution of payment operations and fund transfers in payment accounts;
• Execution of payment operations covered by a credit line;
• Issuing payment instruments and accepting payment operations;
• Postal transfer institutions that provide payment services.

Therefore, payment service providers that provide services related to the operation of a payment account, crypto deposit and withdrawal services, payment initiation services and account information services are not subject to the reporting obligation. The reason for this exclusion is that the respective types of services either do not refer to the execution of payment operations, or would provide information that is already provided by other payment service providers involved in payment operations.

Monitoring and triggering the reporting obligation

Three requirements must be met to trigger the reporting obligation of a payment service provider (the reporting entity):

• The reporting entity must be a payment service provider as defined in Article 243a points 1, 2 & 3 of Directive 2006/112/EC;
• The reporting entity must provide payment services as defined in Article 243a point 2 of Directive 2006/112/EC; between a payer and a payee, where the payer is located in a Member State, and the beneficiary of the payment is in another member state, on a third territory or in a third country.

When the above conditions are met, the payment falls within the scope of the reporting obligation. However, it is not reported unless two additional conditions are met, which are established based on a monitoring test carried out by payment service providers.

These two additional conditions are as follows:

• The reported payment must be a cross-border payment and
• The payment service provider providing payment services in a Member State must execute in that Member State at least 25 cross-border payments per quarter to a single payee to trigger the reporting obligation.

Submission deadlines

As the data declaration will be carried out quarterly, the first transmission will be made in April 2024. Reporting deadlines for payment service providers:

• April 30 Period 1 (January-March)
• 31 July 2nd Period (April-June)
• October 31 Period 3 (July-September)
• 31 January 4th Period (October-December)

Cryptio is here to help

• Automated data collection and aggregation: The solution automatically integrates with various PSPs and platforms, collecting and consolidating payment data.
• Data validation and enrichment: The solution validates data accuracy and completeness, potentially enriching it with additional information for better analysis.
• Increased efficiency: streamline the overall compliance process, freeing up internal resources for other tasks.

Book a demo with our team today.