02
Sat, Mar
42 New Articles

Czech Republic: Upcoming New Administrative Obligations for Payment Service Providers

Czech Republic: Upcoming New Administrative Obligations for Payment Service Providers

Issue 10.4
Tools
Typography
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

The Czech government is introducing new requirements and obligations for payment service providers based on the latest EU legislation. The new rules are expected to take effect from January 2024 and the legislative process is underway.

The Czech Act No 235/2004 Coll. (VAT Act) is being amended to align with EU Directive 2020/284 (EU Directive), which aims to combat cross-border tax evasion and fraudulent behavior in e-commerce. 

Online shopping and e-commerce are growing industries, which peaked during the COVID-19 pandemic. The EU Directive aims to combat illegal activity in these industries by imposing several new requirements and obligations on payment service providers.

Payment service providers have crucial information that can easily identify payment recipients. That information includes the amount, date, origin, and location of the payment. The EU thinks this information might be helpful for tax administrators to monitor and enforce tax obligations and combat cross-border fraud and tax evasion related to e-commerce.

Keeping and Reporting Data on Cross-Border Payments

Payment service providers will have to keep evidence of all cross-border payments and collect and keep information about the recipients of payments. A cross-border payment is one where the payer is located in an EU member state and the recipient is located in another member state or in a third country. But this obligation only applies if a recipient registers more than 25 payments in a 12-month period. The threshold was set to exclude insignificant, one-off, non-commercial payments.

Payment service providers will also have to submit these records quarterly to the Specialized Tax Office (SFU) or notify the SFU that no cross-border transactions have been made in the given quarter. The amendment also states that payment service providers will provide the data to relevant authorities online, via the tax portal, in electronic format, and with a structure published by the financial administrator. The provider has to keep the data for three years.

What Information Must Be Recorded?

Payment service providers have to properly identify themselves using their Business Identification Code (BIS) or another ID code. They also have to keep records of recipients’ names, IDs, addresses, VAT or other national tax numbers, IBANs, or any other unique identifiers. 

They have to record specific payment details, including the date, time, amount, and currency of the payment or refund, and the state of origin of the payments – and share this information with the relevant financial authorities.

Central Electronic System of Payment 

The EU Directive requires payment service providers to store data for three years, giving member states enough time to detect and investigate VAT fraud. Data obtained by the SFU from payment service providers will be transferred to the Central Electronic System of Payment (CESOP). This system will contain all the data obtained by the tax administrations of each individual member state from payment service providers. 

The system will aggregate all payment information related to VAT for individual payees, and give a more complex overview of payments received in the EU by payees (i.e., businesses) and from payers (i.e., consumers shopping online).

To What End?

The CESOP system will make it easier for EU financial institutions to cooperate with individual member states and it will help in the fight against VAT fraud and tax evasion. It imposes new obligations on businesses, which will incur additional costs to comply with the new rules. As with any technological solution, there’s a risk of data leaks and the misuse of data. So, it will be critical that all information be properly and securely stored and administered. 

By Miroslav Dubovsky, Country Managing Partner, and Marcel Janicek, Senior Associate, DLA Piper

This article was originally published in Issue 10.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here

Our Latest Issue