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Amendment to VAT Act 2024: reporting obligation for payment service providers

According to the upcoming amendment to the VAT Act, a new reporting obligation for payment service providers regarding payments abroad will apply from 1 January 2024. The draft amendment is currently awaiting its first reading in the chamber of deputies.

The draft amendment responds to changes in European legislation according to which the Central Electronic System of Payment (CESOP) information will be created. The new legislation obliges payment service providers to keep records of cross-border payments and their payees and to submit data from these records to the tax administrator. This obligation responds to the simplification being introduced to e-commerce and generally aims to strengthen compliance with VAT rules.

The obligation to keep records applies to all payment service providers (most often banks) that provide their services in the Czech Republic. Payment service means the non-cash transfer of funds from own and not-own sources in the form of payments by credit cards, collections, or standing orders. The decisive factor is that there is a transfer of funds. The obligation to record payments from abroad is activated when a limit of 25 payments per calendar quarter for the same payee is exceeded. The number of cross-border payments to the same payee shall be determined by the individual identifiers indicating the payee's state of establishment.

Payment service providers will not be obligated to collect any new information that would not normally be available to them: the notification shall include information such as the payment service provider's BIC, the payee's name, tax identification number (not necessarily the tax ID no. allocated for VAT purposes), IBAN or any similar identifier that unambiguously identifies the payee and their state of establishment, the payee’s address, and other cross-border payment details (date and time of the transaction, payment amount and currency, etc.).

The provider of the registered payment service shall submit the notification by the end of the month following the end of the calendar quarter even if the obligation to keep records has not arisen (the so-called zero report). The notification must always be submitted on the last day of the month including weekends or holidays. The submission may take the form of an electronic data message in a pre-determined structure.

The provider must keep the relevant data electronically for three years from the end of the calendar year in which the cross-border payment was made and must also provide the data on cross-border payments to the tax authority at any time upon request.