With new transparency rules, EU member states can more easily spot online sellers who evade VAT duties.
The EU has introduced new rules on cross-border payments that came into effect yesterday (1 January) to make it easier for member states to spot VAT fraud in e-commerce.
E-commerce VAT fraud happens when online sellers who have no physical presence in an EU country sell goods or services to EU consumers without registering for VAT in the EU, or by underreporting their online sales.
The new transparency rules will give tax authorities the tools they need to crack down on this fraud.
The new system targets payment service providers (PSPs) such as banks, payment institutions, and post office giro services, which handle most of the online purchases in the EU.
Under the new rules, these PSPs will have to track the recipients of cross-border payments. From 1 April, they will have to report online sellers who receive more than 25 cross-border payments per quarter to the authorities of member states.
This information will be stored, aggregated, and cross-checked with other data in a new centralized database, the Central Electronic System of Payment Information (CESOP).
This database will be accessible to member states through Eurofisc, the EU’s network of anti-VAT fraud experts, which will help them identify online sellers who evade VAT obligations, including those outside the EU.
Eurofisc liaison officials can also take action at the national level, such as requesting information, conducting audits, or canceling VAT numbers.
Paolo Gentiloni, EU commissioner for economy, said VAT fraud deprives EU governments of billions in revenue every year and these new rules will be “essential” in the fight against it.
“By using the information collected by payment service providers such as banks and credit card companies, anti-fraud experts in member states will be able to more easily and precisely detect and stop fraudulent behavior in the e-commerce sector.”