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E-commerce: Council reaches provisional agreement on new rules for exchange of VAT payment data

The Council recently (08 November 2019) reached a general approach on a set of rules to facilitate detection of tax fraud in cross-border e-commerce transactions.

The new rules will enable member states to collect, in a harmonised way, the records made electronically available by payment service providers, such as banks. In addition, a new central electronic system will be set up for the storage of the payment information and for the further processing of this information by national anti-fraud officials.

Mika Lintilä, Finnish minister for finance recently said:

Payment service providers are a key link in the chain of online purchases. Thanks to the information they hold, they have a vital role to play in helping national tax authorities identify and fight VAT fraud. By harmonising the way to collect and access this information, member states will have a powerful tool to control whether VAT rules are correctly applied, especially in the area of cross-border e-commerce.

Concretely, this set of new rules consists of two legislative texts:

  • amendments to the VAT directive putting in place requirements on payment service providers to keep records of cross-border payments related to e-commerce. This data will then be made available to national tax authorities under strict conditions, including those related to data protection.
  • amendments to a regulation on administrative cooperation in the area of VAT. These amendments set out the details of how national tax authorities will cooperate in this area to detect VAT fraud and control compliance with VAT obligations.

These rules complements the VAT regulatory framework for e-commerce coming into force in January 2021 which introduced new VAT obligations for online marketplaces and simplified VAT compliance rules for online businesses.

Next steps

These rules should be formally adopted by the Council without further discussion once the text has undergone a legal and linguistic review.

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