New Rules for Payment Service Providers – Introduction
The German Federal Ministry of Finance (BMF) has issued detailed guidance on the new regulatory requirements for payment service providers under Section 22g of the German Value Added Tax Act (UStG).
This guidance comes in response to the need to strengthen measures against VAT fraud within the European Union.
The new rules, effective from 1 January 2024, emphasize the importance of maintaining records, reporting, and retaining information on cross-border payments.
Overview of the New Regulations
Under the revised Section 22g UStG, payment service providers operating in Germany must keep detailed records of cross-border payments processed, provided they execute more than 25 transactions per quarter to the same payee.
These records are then transmitted to the Federal Central Tax Office (BZSt) and subsequently fed into the Central Electronic System of Payment Information (CESOP), a European database designed to monitor and analyze cross-border payment data to prevent VAT fraud.
Key Obligations for Payment Service Providers
The BMF outlines four specific obligations for providers under the new regulation:
- Record-Keeping: Providers must diligently record details of cross-border payments.
- Notification Requirement: Providers must notify the BZSt if they process more than 25 cross-border payments to the same payee in a quarter
- Correction Obligation: Adjustments must be made for any discrepancies in previously reported data.
- Retention Obligation: Providers are required to retain records for a specified period to support potential audits or investigations.
Scope and Application
The new rules apply to various entities, including CRR credit institutions, electronic money institutions, payment institutions, and postal giro offices that offer payment services in Germany.
The BMF clarifies that the regulation covers all payment transactions that result in the provision, transfer, or withdrawal of money, including those involving cryptocurrencies.
For a transaction to be considered cross-border under the regulation, the payer must be located in a European Union member state, while the payee could be in another EU state, an EEA country, or a third country.
Domestic payments within Germany and payments originating from third countries are not covered by these rules.
Compliance and Reporting
Payment service providers must submit the relevant data to the BZSt by the end of the calendar month following each quarter.
For instance, data for the first quarter should typically be submitted by the end of April.
However, the BMF has introduced a non-objection rule for the first report of 2024, extending the deadline to 31 July 2024, to allow providers adequate time to adjust to the new requirements.
Sanctions for Non-Compliance
Failure to adhere to the record-keeping, reporting, or retention requirements can result in fines up to EUR 5,000.
These sanctions underscore the seriousness with which the German authorities are treating compliance with these new regulations.
Support for Payment Service Providers
The BMF’s circular includes comprehensive resources such as a questionnaire focusing on the implementation details and a guidance paper that summarizes the GloBE Model Rules along with its commentary and administrative guidance.
These documents are designed to help payment service providers understand and implement the required changes effectively.
New Rules for Payment Service Providers – Conclusion
The implementation of these new regulations marks a significant step in Germany’s efforts to combat VAT fraud.
By ensuring that payment service providers maintain accurate records and report cross-border payment activities, the BMF aims to create a more transparent and secure financial environment.
Payment service providers are encouraged to review these new regulations closely, establish appropriate compliance mechanisms, and maintain diligent records to avoid penalties.
Final thoughts
If you have any queries about these New Rules for Payment Service Providers, or German tax matters more generally, then please get in touch.