Source: EURLEX
Language: en
Format: md

**Council of the**
**European Union**

**Interinstitutional File:**

**2018/0412(CNS)**

**PROPOSAL**

**Brussels, 12 December 2018**
**(OR. en)**

**15508/18**

**FISC 559**
**ECOFIN 1198**
**EF 325**

From: Secretary-General of the European Commission,
signed by Mr Jordi AYET PUIGARNAU, Director

date of receipt: 12 December 2018

To: Mr Jeppe TRANHOLM-MIKKELSEN, Secretary-General of the Council of
the European Union

No. Cion doc.: COM(2018) 812 final

Subject: Proposal for a COUNCIL DIRECTIVE amending Directive 2006/112/EC as
regards introducing certain requirements for payment service providers

Delegations will find attached document COM(2018) 812 final.

Encl.: COM(2018) 812 final

15508/18 JB/mf

#### ECOMP.2B EN

EUROPEAN

COMMISSION

Brussels, 12.12.2018
COM(2018) 812 final

2018/0412 (CNS)

Proposal for a

**COUNCIL DIRECTIVE**

**amending Directive 2006/112/EC as regards introducing certain requirements for**

**payment service providers**

{COM(2018) 813 final} - {SEC(2018) 495 final} - {SWD(2018) 487 final} 
{SWD(2018) 488 final}

### **EN EN**

**EXPLANATORY MEMORANDUM**

**1.** **CONTEXT** **OF** **THE** **PROPOSAL**

**•** **Reasons for and objectives of the proposal**

In October 2017 [1], the Commission had already committed to address the administrative
capacity of tax authorities to fight electronic commerce (hereinafter ‘e-commerce’) VAT
fraud by improving cooperation with third parties. In the statement included in the minutes for
the adoption of Council Directive (EU) 2017/2455 (the VAT E-commerce Directive) [2] in
December 2017, the Council stressed the need to improve anti-fraud tools [3] . The current
initiative to fight e-commerce VAT fraud complements and paves the ground for a smooth
application of the new measures introduced with the VAT E-commerce Directive in the
context of the Commission’s Digital Single Market Strategy [4] .

In particular, the VAT E-commerce Directive introduced new VAT obligations for online
marketplaces [5] and new simplifications to help businesses comply with VAT obligations for
supplies of services, distance sales of goods and imports, including electronic VAT
registration and VAT payment through the One Stop Shop (registration in one single Member
States instead of in all the Member States of consumption). These measures will strengthen
VAT compliance by simplifying the VAT system, but tax authorities still need to be able to
detect and control fraudulent businesses. At present, this is a challenge for tax authorities. The
European Court of Auditors [6] has remarked that the VAT legislation on e-commerce
essentially relies on the willingness of businesses to voluntarily register and pay the due VAT.
There are nevertheless limits to how Member States can use the current legal framework for
administrative cooperation. If the above-mentioned compliance simplifications are not
accompanied by anti-fraud measures, fraudsters will have little incentive to change their
attitude and start complying with VAT obligations. Thus, the success of compliance measures
in e-commerce also depends on the effectiveness of anti-fraud measures, which must be
developed in parallel.

1 Communication from the Commission to the European Parliament, the Council and the European

–
Economic and Social Committee On the follow-up to the Action Plan on VAT Towards a single EU
VAT area – Time to act (COM(2017) 566 final), point 2.1.1, page 3. See also point 6 of 20 measures to
tackle the VAT gap, annex to the VAT action plan, available at:

                                                        [https://ec.europa.eu/taxation_customs/sites/taxation/files/docs/body/2016](https://ec.europa.eu/taxation_customs/sites/taxation/files/docs/body/2016-03_20_measures_en.pdf) 03_20_measures_en.pdf
2 Council Directive (EU) 2017/2455 of 5 December 2017 amending Directive 2006/112/EC and
Directive 2009/132/EC as regards certain value added tax obligations for supplies of services and
distance sales of goods (OJ L 348, 29.12.2017, p. 7).
3 Council of the European Union 14769/1/17 REV 1, 30 November 2017,
[http://data.consilium.europa.eu/doc/document/ST-14769-2017-REV-1/en/pdf](http://data.consilium.europa.eu/doc/document/ST-14769-2017-REV-1/en/pdf)
4 Implementation of the Digital Single Market digital single market strategy (COM(2017) 228 final,
10.5.2017) see:
https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1496330315823&uri=CELEX:52017DC0228
5 Article 14a of Council Directive 2006/112/EC will make online market places, platforms and portals
‘deemed suppliers’ for the sales of goods facilitated through their electronic interfaces. They will be
deemed to have received and supplied those goods themselves for (a) distance sales of goods imported
from third territories or third countries not exceeding a value of EUR 150, and (b) the B2C supplies of
goods which are already in the EU (i.e. in fulfilment centres) by non-EU-established taxable persons
facilitated through these platforms.
6 European Court of Auditors, Background Paper, Collection of VAT and customs duties on cross-border
e-commerce, July 2018.

### EN 1 EN

E-commerce has been growing rapidly in recent years, helping consumers to buy goods and
services online. Consumers can choose between different suppliers, products and brands.
They can also pay online in a trustful environment without moving from their computer or
smartphone. Suppliers have changed their business models to benefit from e-commerce and
sell their products to consumers globally without the need for a physical retail presence.
However, this opportunity is also exploited by fraudulent businesses to gain an unfair market
advantage by not fulfilling their VAT obligations.

The impact assessment attached to the present proposal identified three main cases of crossborder e-commerce VAT fraud: (i) intra-EU supplies of goods and services, (ii) imports of
goods from businesses established in a third country or third territory (i.e. a country or
territory outside the EU) to consumers in the Member States, and (iii) supplies of services
from businesses established in a third country [7] to consumers in the Member States.

The total VAT loss within the Member States on cross-border supplies of goods is estimated
at EUR 5 billion a year [8] . VAT fraud was also reported in cross-border supplies of services,
namely in online television and digital games [9] . This fraud was documented by Europol and
the European Union Intellectual Property Office in Europol’s latest report about illegal
distribution of (and sales of access to) television broadcasts [10] . This fraud has also been
documented by the television industry organisation Nordic Content Protection (NCP) [11] .
Online television distributors in Denmark, Finland and Sweden alone (these countries
together have less than 10% of the EU’s total online television market in terms of revenues) [12]
estimate their annual loss of sales from illegal distribution at EUR 436 million. This amounts
to approximately EUR 103 million in potential VAT losses [13] . These numbers (which will
grow in parallel with the growth of e-commerce) show the urgent need to act to combat ecommerce VAT fraud. However, most tax authorities lack the tools and the sources of
information to quantify the level of e-commerce VAT fraud [14] . In e-commerce VAT fraud, the
internet allows fraudulent businesses to hide their own identity behind a domain name. Even
when a tax authority is aware of the existence of a given online shop, the identity of the
business behind it, its real location, or its turnover in that Member State often remain
unknown. This represents a problem for tax authorities who might seek to start an
investigation or initiate administrative cooperation at EU or international level. The Member
States of consumption, where the VAT must be paid, most likely do not have any record or
information to initiate an inspection. This is because the final consumers have no record
7 This includes third territories under article 6.
8 See Proposal for a Council Directive amending Directive 2006/112/EC and Directive 2009/132/EC as
regards certain value added tax obligations for supplies of services and distance sales of goods
(COM(2016) 757 final), p.2.
9 The amount of illegal TV broadcasting in Latvia in 2015, Stockholm school of economics, Nelegālās
maksas TV apraides apjoms Latvijā 2015, available at:
[https://www.researchgate.net/profile/Arnis_Sauka/publication/303382487_Nelegalas_maksas_TV_apra](https://www.researchgate.net/profile/Arnis_Sauka/publication/303382487_Nelegalas_maksas_TV_apraides_apjoms_Latvija_2015/links/573f5c7408ae298602e8f2f2.pdf)
[ides_apjoms_Latvija_2015/links/573f5c7408ae298602e8f2f2.pdf](https://www.researchgate.net/profile/Arnis_Sauka/publication/303382487_Nelegalas_maksas_TV_apraides_apjoms_Latvija_2015/links/573f5c7408ae298602e8f2f2.pdf)
10 Europol and European Union Intellectual Property Office: 2017 Situation Report on Counterfeiting and
Piracy in the European Union, available at [www.europol.europa.eu/publications-documents/2017-](http://www.europol.europa.eu/publications-documents/2017-situation-report-counterfeiting-and-piracy-in-european-union)
[situation-report-counterfeiting-and-piracy-in-european-union](http://www.europol.europa.eu/publications-documents/2017-situation-report-counterfeiting-and-piracy-in-european-union)
11       Nordic Content Protection: Trend Report 2017, available at: [www.ncprotection.com/wp](http://www.ncprotection.com/wp-content/uploads/2017/03/Trend-Report-2017.pdf)

                               -                                [content/uploads/2017/03/Trend](http://www.ncprotection.com/wp-content/uploads/2017/03/Trend-Report-2017.pdf) Report 2017.pdf
12 [See: www.ofcom.org.uk/__data/assets/pdf_file/0027/95661/ICMR-2016-4.pdf](http://www.ofcom.org.uk/__data/assets/pdf_file/0027/95661/ICMR-2016-4.pdf)
13 Calculated using standard rates without taking into account reduced rates
14 In the targeted consultation to prepare this proposal, only three tax authorities provided rough VAT loss
estimates on B2C intra-EU supplies of goods, B2C intra-EU supplies of services, and imports of goods
in 2015, 2016 and 2017.

### EN 2 EN

keeping obligations for their online purchases. Even if the latter was the case, it would be
disproportionate to systematically have recourse to these final consumers to investigate VAT
fraud by the seller.

Moreover, when the fraudsters and their location are unknown, it can become a real issue to
know to which Member State a request for administrative cooperation should be addressed.

This could result in bulk identification requests. They would have to be sent either to a third
party (i.e. the online market place or payment service providers) which could potentially hold
the information, or they could be made to a tax authority of a country where the third party is
established. Nevertheless, this would be considered disproportionate under Article 54(1) of
Regulation (EU) No 904/2010. Furthermore, under Article 54(2) of the same Regulation,
Member States cannot be required to provide information if their national legislation does not
authorise them to collect it. This limits the possibilities for Member States to request thirdparty data from other Member States.

The present proposal seeks to solve the problem of e-commerce VAT fraud by strengthening
the cooperation between tax authorities and payment service providers. In recent years, more
than 90 % of online purchases by European customers were made through credit transfers,
direct debits and card payments, i.e. through an intermediary involved in the transaction [15] (a
payment service provider), and this is a trend that will continue in the future [16] . Third parties
that hold payment information can therefore give a complete picture of online purchases to
tax authorities to help them properly carry out their task of monitoring compliance with VAT
obligations on e-commerce supplies of goods and services. The experience of the Member
States that already cooperate with payment service providers at national level has shown that
cooperation with payment service providers produces tangible results in fighting e-commerce
VAT fraud [17] . Some third countries also use payment information as a tool for detecting noncompliant traders in combination with simplified collection regimes for cross-border B2C
supplies of goods similar to the EU system [18] .

**•** **Consistency with existing policy provisions in the policy area**

This proposal complements the current VAT regulatory framework as recently modified by
the VAT E-commerce Directive in the context of the Commission’s Digital Single Market
Strategy. Furthermore, this initiative strengthens the administrative cooperation framework to
better tackle e-commerce VAT fraud and restore fair competition. Fighting tax fraud and tax
evasion to prevent distortion of competition and help secure national and EU revenues is a
Commission priority. The political guidelines [19] of the present Commission called for greater
efforts to be made to combat tax evasion and tax fraud, and in the State of the Union 2018 [20] it

15 E-shopper barometer 2017(DPD group), available at:
[https://www.dpd.com/be_en/business_customers/dpd_insights/e_shopper_barometer_2017 and](https://www.dpd.com/be_en/business_customers/dpd_insights/e_shopper_barometer_2017)
International Post Corporation, e-Commerce logistics and delivery, eCom21 2016.
16 See:
[https://www.atkearney.com/documents/10192/1448080/Winning+the+Growth+Challenge+in+Payment](https://www.atkearney.com/documents/10192/1448080/Winning+the+Growth+Challenge+in+Payments.pdf/b9da93a5-9687-419e-b166-0b25daf585ff)
[s.pdf/b9da93a5-9687-419e-b166-0b25daf585ff, p. 5.](https://www.atkearney.com/documents/10192/1448080/Winning+the+Growth+Challenge+in+Payments.pdf/b9da93a5-9687-419e-b166-0b25daf585ff)
17 In particular, the Finnish tax authority was able to collect EUR 16 million in 2016 based on cooperation
with payment service providers.
18 See Annex 11 of the Impact assessment, ‘Third countries using payment data as VAT control tool’.
19 See: https://ec.europa.eu/commission/sites/beta-political/files/juncker-political-guidelinesspeech_en.pdf
20 [See: https://ec.europa.eu/commission/sites/beta-political/files/soteu2018-brochure_en.pdf](https://ec.europa.eu/commission/sites/beta-political/files/soteu2018-brochure_en.pdf)

### EN 3 EN

is reiterated that the Commission is pursuing a far-reaching strategy to ensure that all
companies, big and small, pay their fair share of tax.

Regulation (EU) No 2018/1541 [21] amending Regulation (EU) No 904/2010 on administrative
cooperation and fighting fraud in the field of value added tax [22] creates new tools for
administrative cooperation between Member State tax authorities. These tools will mainly be
used to fight (i) so-called carousel fraud (carried out on B2B transactions); (ii) fraud involving
the margin scheme applicable to second-hand cars; (iii) fraud exploiting specific customs
regimes applicable to imports carried out by taxable persons (also on B2B transactions); and
(iv) will allow joint actions between tax authorities (i.e. joint administrative enquires). Experts
from tax authorities and businesses in the EU VAT Forum [23] stress that the traditional form of
cooperation to combat VAT fraud is based on records held by the businesses directly involved
in the transaction chain. For cross-border B2C supplies, this information may not be directly
available and thus ‘traditional’ cooperation between tax authorities is insufficient [24] .
Therefore, this initiative also complements the amendments most recently introduced to the
EU administrative cooperation framework in the field of VAT, by giving tax authorities a new
tool to detect VAT fraud on cross-border B2C supplies.

Finally, this initiative should also be seen in an international context. When fraud is
committed by suppliers established in a third country or third territory, international
cooperation is crucial for the enforcement of the missing VAT due. The Union has recently
concluded an agreement for VAT cooperation with Norway [25] and is active in the OECD to
strengthen the use of administrative cooperation tools at international level. This initiative will
give Member States the evidence to detect fraudsters in third countries. This evidence will be
used as a first step to activate international cooperation or to contribute to the international
dialogue on improving administrative cooperation with other jurisdictions.

**2.** **LEGAL** **BASIS,** **SUBSIDIARITY** **AND** **PROPORTIONALITY**

**•** **Legal basis**

The legal basis for this initiative is Article 113 of the Treaty on the Functioning of the
European Union (TFEU). This Article provides for the Council, acting unanimously in
accordance with a special legislative procedure, to adopt provisions for the harmonisation of
Member States’ rules in the area of indirect taxation to the extent that such harmonisation is
necessary to ensure the establishment and functioning of the single market and avoid
distortion of competition.

21 Council Regulation (EU) 2018/1541 of 2 October 2018 amending Regulations (EU) No 904/2010 and
(EU) 2017/2454 as regards measures to strengthen administrative cooperation in the field of value
added tax (OJ L 259, 16.10.2018, p. 1).
22 Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating
fraud in the field of value added tax (OJ L 268, 12.10.2010, p. 1).
23 The EU VAT Forum is a Commission experts group that offers a discussion platform where business
and VAT authorities meet to discuss how the implementation of the VAT legislation can be improved
in practice. See Commission Decision of 3 July 2012 setting up the EU VAT forum (OJ C 198,
6.7.2012, p. 4).
24 Consolidated report on cooperation between Member States and businesses in the field of e
                                                                      -                                                                      [commerce/modern commerce, p. 5. See: https://ec.europa.eu/taxation_customs/business/vat/vat](https://ec.europa.eu/taxation_customs/business/vat/vat-reports-published_en) reports
[published_en](https://ec.europa.eu/taxation_customs/business/vat/vat-reports-published_en)
25 See: [http://www.consilium.europa.eu/en/press/press-releases/2018/02/06/eu-norway-agreement-signed-](http://www.consilium.europa.eu/en/press/press-releases/2018/02/06/eu-norway-agreement-signed-strengthening-the-prevention-of-vat-fraud/)
[strengthening-the-prevention-of-vat-fraud/](http://www.consilium.europa.eu/en/press/press-releases/2018/02/06/eu-norway-agreement-signed-strengthening-the-prevention-of-vat-fraud/)

### EN 4 EN

**•** **Subsidiarity**

This initiative is consistent with the principle of subsidiarity, as the main problem at stake, ecommerce VAT fraud, is common to all Member States and is exacerbated by the insufficient
tools at the disposal of tax authorities. Member States alone are not able to obtain from third
parties such as payment service providers, the information necessary to control VAT crossborder supplies of goods and services, ensure that the e-commerce VAT rules (as recently
amended by the VAT E-commerce Directive) are correctly applied, and tackle e-commerce
VAT fraud. Therefore, cooperation between the Member States is crucial. The legal
framework for administrative cooperation between Member States in the field of VAT is laid
down in Regulation (EU) No 904/2010. Therefore, any initiative to introduce new tools for
cooperation targeted at this specific problem requires a proposal by the Commission to amend
the existing EU legal framework. To allow tax authorities to collect VAT-relevant payment
data, new record-keeping obligations for payment service providers must be introduced. This
requires a proposal to amend the VAT Directive.

**•** **Proportionality**

This proposal does not go beyond what is necessary to meet the objective of fighting ecommerce VAT fraud. In particular, the new system is expected to provide tax authorities
with the necessary information and resources to detect e-commerce VAT fraud and collect
additional VAT. The administrative burden for businesses and tax authorities would be
reduced overall compared to the present situation, and legitimate businesses would benefit
from a more level playing field.

The requirement for payment service providers to keep a number of records to be sent to the
tax authorities also complies with the principle of proportionality. Payment service providers
will be required to keep records of data that are already at their disposal to execute the
payment transactions. Furthermore, an EU-harmonised obligation for record keeping and
transmission of data to tax authorities will limit the administrative burdens on payment
service providers (compared to the burden of requiring these payment service providers to
comply with diverging national approaches).

Fighting VAT fraud is an important objective of general public interest of the Union and of
the Member States. Only the data necessary to achieve that objective (combating e-commerce
VAT fraud) will be processed by the anti-fraud experts of tax authorities, in line with the
General Data Protection Regulation [26], Regulation (EU) 2018/1725 [27] and the Charter of
Fundamental Rights [28] . More precisely, the only data that will be processed are the data that
allow the tax authorities to (i) identify the suppliers, (ii) verify the number of transactions and
their monetary value, and (iii) verify the origin of the payments. Data on consumers are not
included in the present initiative, apart from data on the Member States of origin of the
payments (i.e. the Member State the consumers are located in). Proportionality is also ensured
by a threshold below which the payment service providers do not have to send payment data

26 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the
protection of natural persons with regard to the processing of personal data and on the free movement of
such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (Text with EEA
relevance) (OJ L 119, 4.5.2016, p. 1).
27 Regulation (EU) 2018/1725 of the European Parliament and of the Council of 23 October 2018 on the
protection of natural persons with regard to the processing of personal data by the Union institutions,
bodies, offices and agencies and on the free movement of such data, and repealing Regulation (EC) No
45/2001 and Decision No 1247/2002/EC (OJ L 295, 21.11.2018, p. 39).
28 Charter of Fundamental Rights of the European Union (OJ C 326, 26.10.2012, p. 391).

### EN 5 EN

to the tax authorities. The threshold would exclude from the present initiative and from the
process of personal data those payments that most likely do not refer to economic activities.

**•** **Choice of the instrument**

A Directive is proposed in view of amending the VAT Directive to introduce new record
keeping obligations for payment service providers.

A Regulation is proposed in view of amending the Regulation (EU) No 904/2010 on
administrative cooperation and fighting fraud in the field of value added tax, to introduce a
new database of VAT related payment data to be accessible by Member States only to fight ecommerce VAT fraud.

**3.** **RESULTS** **OF** **EX-POST** **EVALUATIONS,** **STAKEHOLDER**
**CONSULTATIONS** **AND** **IMPACT** **ASSESSMENTS**

**•** **Ex-post evaluations**

The current proposal is supported by an evaluation of Regulation (EU) No 904/2010, in
particular its sections focusing on its use in the field of e-commerce VAT fraud.

In general, tax authorities considered the current Regulation (EU) No 904/2010 an effective
tool to fight e-commerce VAT fraud. However, tax authorities mentioned that the tools for
administrative cooperation currently at their disposal do not easily allow the identification and
control of online businesses when these online businesses’ domain and bookkeeping records
are in another country (regardless of whether that other country is a Member State of the EU
or not). Tax authorities also stressed the need to increase the commitment of Member States
to invest more resources into administrative cooperation, as this is a key factor in increasing
the effectiveness of Regulation (EU) No 904/2010 in the fight against e-commerce VAT
fraud. Finally, some Member States also mentioned that the effectiveness of the Regulation
could be increased with new tools, such as access to - and exchange of - relevant payment
information.

While the tax authorities considered that the tools laid down in Regulation (EU) No 904/2010
are relevant for fighting VAT fraud, they also stressed that there is room for improvement. In
the view of tax authorities, the recent development of e-commerce and the large volumes of ecommerce transactions require new, more effective, and more efficient tools for
administrative cooperation. Moreover, tax authorities said they expected that existing tools for
fighting VAT fraud would become less relevant in the future due to changes in business
models and changes in the patterns of VAT fraud.

Even though tax authorities generally lack quantitative evidence on the benefits and costs of
administrative cooperation, they consider that the benefits of administrative cooperation are
proportional to - or even higher than - the costs that tax authorities incurred in the exchange of
information.

Regulation (EU) No 904/2010 and the current proposal contribute to the proper functioning of
the single market. They are also consistent with the VAT E-commerce Directive rules.
Nonetheless, Member State tax authorities recognised that the growth of e-commerce means
they must deal with new challenges, such as how to process data for the detection of - and
fight against - e-commerce VAT fraud.

### EN 6 EN

Finally, both tax authorities and other stakeholders recognised the added value of the
administrative cooperation framework laid down in Regulation (EU) No 904/2010, as ecommerce VAT fraud affects all Member States.

In conclusion, the evaluation showed that national anti-fraud measures are not sufficient to
fight e-commerce VAT fraud and that administrative cooperation between Member States is
necessary. It also showed that changes in e-commerce patterns require new and appropriate
tools for the exchange of information.

**•** **Stakeholder consultations**

In 2017, the Commission sought the opinion of several stakeholders through a targeted
consultation addressed to the tax authorities and to businesses, including payment service
providers in particular. In 2017, a public consultation was also launched [29] .

The results of the consultations confirmed that all stakeholders recognise e-commerce VAT
fraud as a significant problem. Businesses stressed that e-commerce VAT fraud harms honest
businesses by distorting competition. Both tax authorities and businesses in general confirmed
that tax authorities need payment information to fight e-commerce VAT fraud. Data
protection was not considered an impediment to the collection and exchange of payment
information, provided that the personal data of the payers is processed under the conditions
laid down by the General Data Protection Regulation.

Most respondents expressed a positive opinion on amending the EU regulatory framework to
provide tax authorities with more effective anti-fraud tools. A centralised EU system to
collect and exchange VAT-relevant payment information was considered the most costeffective tool.

Both tax authorities and payment service providers confirmed the added value of a
standardised and harmonised approach for the collection and exchange of payment
information.

This proposal was drafted after consultation with Member State tax authorities and businesses
representatives, including payment service providers, as part of the VAT Forum subgroup on

e-commerce.

**•** **Collection and use of expertise**

Besides consulting all stakeholders, no outside experts were needed to draw up the current
proposal.

**•** **Impact assessment**

In addition to the baseline scenario, the impact assessment considered two options:

(1) a non-regulatory option, basically consisting in providing guidelines to help tax
authorities develop their administrative capacity to fight e-commerce VAT fraud;

(2) a regulatory option, implying the amendment of the EU legal framework (i) for the
payment service providers to keep records of VAT-relevant payment information,

29 The Commission also published the combined roadmap/inception impact assessment (see:
[http://ec.europa.eu/info/law/better-regulation/initiatives/ares-2018-899238_en) “Exchange of VAT-](http://ec.europa.eu/info/law/better-regulation/initiatives/ares-2018-899238_en)
relevant payment data”, allowing for initial feedback on the initiative. During the feedback period, 15
February 2018 - 15 March 2018, the Commission received only three answers. Two were supporting the
initiative while the third one was not related to the content of the initiative.

### EN 7 EN

and (ii) for the Member State tax authorities to collect and exchange the payment
information.

Under the regulatory option, two alternative technical solutions were envisaged to make tax
authorities exchange the payment information: a distributed application similar to the VAT
Information Exchange System, or a central repository at EU level (to be developed by the
Commission).

The impact assessment showed that a central repository was the option that best addressed the
objective of fighting e-commerce VAT fraud.

A central repository would ensure the best tackling of VAT fraud. It would give more
guarantees in terms of uniformity of data and data analysis, and would provide for a clearer
EU-wide perspective of the turnover of detected fraudsters than decentralised repositories.

The exchange of information through a central repository would also better reduce market
distortion. As cooperation leads to better results for tax authorities, legitimate businesses
would enjoy a more level playing field. The stakeholder consultation did not allow for a
precise quantification of the compliance costs for payment service providers. However, the
impact assessment showed that the harmonisation of reporting obligations in one single
format for the transmission of information (and one single interface) will reduce compliance
costs for payment service providers.

Tax authorities would also have lower development and running costs under the centralised
solution than they would with a decentralised system at national level.

The impact assessment for the proposal was considered by the Regulatory Scrutiny Board on
27 June 2018. The Board gave a positive opinion to the proposal with some recommendations
that have been taken into account. The opinion of the Board and its recommendations are
included in Annex 1 to the Staff Working Document for the impact assessment accompanying
the proposal [30] .

**•** **Regulatory fitness and simplification**

This initiative does not fall within the remit of the Regulatory Fitness Programme. The likely
costs for tax authorities and the Commission are listed in Section 4.

The information received during the targeted consultation did not make possible any reliable
quantification of costs for the payment service providers in the impact assessment. However,
payment service providers currently receive information requests from different Member
States in a variety of different formats and following different procedures. Under this
initiative, the payment service providers would have to use an EU-harmonised standard for
the transmission of payment information to the tax authorities of Member States. This would
reduce the overall administrative burden on payment service providers.

The initiative does not provide for any new VAT obligations on the suppliers of goods and
services to final consumers.

30 The executive summary sheet is available at the following page:
[http://ec.europa.eu/transparency/regdoc/index.cfm?fuseaction=list&coteId=10102&version=ALL&p=1](http://ec.europa.eu/transparency/regdoc/index.cfm?fuseaction=list&coteId=10102&version=ALL&p=1&)
&

### EN 8 EN

Finally, this initiative is expected to considerably reduce Member States’ VAT losses due to
e-commerce VAT fraud.

**•** **Fundamental rights**

The proposal under consideration will trigger new exchanges and processing of VAT-related
personal information.

The General Data Protection Regulation gives a wide definition of personal data, which
includes any information on an identified or identifiable natural person who can be identified
directly or indirectly. For this reason, payment information falls under its scope and the
principles applicable for the protection of personal data as laid down in the Charter of
Fundamental Rights.

The General Data Protection Regulation and Regulation (EU) 2018/1725 lay down very
precise principles for how subjects’ rights must be complied with while processing personal
data. However, the Union may use legislative measures to restrict these principles and the

—
rights of the data subject [31] as long as the restrictions respect the principles of necessity and

—
proportionality to safeguard important objectives of general public interest of the Union,
such as economic and financial interests, including taxation [32] .

The impact assessment supporting this initiative showed that tax authorities have no other
effective alternative way of collecting the necessary information to fight e-commerce VAT
fraud. Therefore, the exchange of payment information is a necessary measure.

Furthermore, only payment information that is necessary to fight e-commerce VAT fraud
would be processed under this initiative. The information that would be processed only refers
to the recipients of funds (payees) and on the payment transaction itself (amount, currency,
date), while information on the consumers paying for goods or services (payers) is not part of
the exchange of information. Therefore, that information would not be used for other
purposes, such as controlling purchase habits of the consumers. Furthermore, the proposal
includes a ceiling linked to the number of payments received by a given payee, excluding the
payments likely executed for private reasons. Domestic payments would also be excluded
from the scope of the initiative. Finally, the payment information would only be available to
the Eurofisc liaison officials of the Member States [33] and only for the time necessary to fight ecommerce VAT fraud.

**4.** **BUDGETARY** **IMPLICATIONS**

It is expected that the investment costs of the Commission and of the tax authorities will be
outweighed by the increase in VAT revenues collected. In fact, B2C online sales accounted

31 Restrictions could be set on the right to be informed in a transparent way about: the processing of data
(Articles 12, 13 and 14); access to data (Article 15); rectification of data (Article 16); erasure of data
(Article 17); restriction of processing data (Article 18); being notified about any rectification or erasure
of data (Article 19); receiving data in a structured and common format - data portability (Article 20);
the right to object (Article 21); and the right not to be subject to automated processing and profiling
(Article 22).
32 Article 23 GDPR and Article 25 of Regulation (EU) 2018/1725.
33 The Eurofisc liaison officials are anti-fraud experts of the tax authorities and are appointed by the
Member States as the competent officials for the exchange of early warning signals to fight VAT fraud.
Regulation (EU) No 904/2010, Chapter X.

### EN 9 EN

for around EUR 600 billion in 2017 [34] . Therefore, assuming that tax authorities would be able
to assess a VAT loss corresponding to 1% of that turnover, this would generate up to EUR 1.2
billion in VAT at EU-28 level. Even accounting for incomplete recovery of assessed VAT,
these amounts would far exceed the overall operational costs for the initiative. Furthermore,
fraud levels account for several percentage points of e-commerce sales. As a result of the
increased collection of VAT, it is expected that the VAT gap will be reduced in the e
commerce sector.

The costs of this initiative will be spread among several years starting in 2019. The first part
of these costs (until 2020) will be covered by existing allocations in the current Fiscalis 2020
programme. The majority of the costs will nevertheless take place after the year 2020, as
described in the Legislative Financial Statements.

Taking into account the highest possible costs incurred by the Commission, the budgetary
implications have been estimated to a one-off cost of EUR 11.8 million for setting-up the
system, and an annual running cost of EUR 4,5 million once the system is fully operational. It
was estimated that these running costs would only start in 2022 once the system is
operational. Their impact on the budget was calculated over a five year period for a total
(including the one-off cost) of EUR 34,3 million to set-up and run the system until 2027.

These costs are consistent with the MFF proposal and the Fiscalis programme for the next
period.

**5.** **OTHER** **ELEMENTS**

**•** **Implementation plans and arrangements for monitoring, evaluation and**
**reporting**

The Eurofisc reports and the annual statistics of the Member States are presented and
discussed in the Standing Committee on Administrative Cooperation [35] in accordance with
Article 49 of Regulation (EU) No 904/2010. The Standing Committee is chaired by the
European Commission. In addition, the Commission will seek to obtain from Member States
any relevant information on the functioning of the new system and on fraud. Where relevant,
coordination will be ensured within the Fiscalis Committee (this committee has still not yet
been set up under the new Fiscalis programme [36] ).

Regulation (EU) No 904/2010 and Directive 2006/112/EC already lay down rules for periodic
Commission evaluations and reporting. Therefore, in line with these existing obligations,
every 5 years, the Commission will report to the European Parliament and the Council on the
functioning of the new administrative cooperation tool, pursuant to Article 59 of Regulation
(EU) No 904/2010.

Furthermore, every 4 years the Commission will report to the European Parliament and the
Council on the operation of the new VAT obligations imposed on payment service providers

34 E-commerce Europe estimated 2017 e-commerce turnover at EUR 602 billion for the North, East and
South regions of Europe.
35 The Standing Committee on Administrative Cooperation (SCAC) is composed of Member States
representatives and chaired by the Commission. The SCAC is responsible for the implementation of
Regulation (EU) No 904/2010.
36 Proposal for a Regulation of the European Parliament and of the Council establishing the 'Fiscalis'
programme for cooperation in the field of taxation (COM(2018) 443 final), Article 18.

### EN 10 EN

pursuant to Article 404 of Directive 2006/112/EC. The Commission will ensure that the two
reports are coordinated and built on the same findings.

**•** **Detailed explanation of the specific provisions of the proposal**

In Article 243a the definitions refer to the relevant provisions of Directive (EU) 2015/2366 [37]
(PSD2) on payment services in the internal market.

Article 243b of the VAT Directive introduces a new record-keeping obligation for payment
service providers. These payment services are set out in Annex 1 of PSD2. Not all payment
services are relevant for the control of cross-border supplies of goods and services. The only
payment services that are relevant are those that result in a cross-border transfer of funds to
the payees [38] (or to the payment service providers acting on behalf of the payees) and only
when the payer [39] is located in one of the Member States. This is because the Member State of
origin of the payment gives an indication to the tax authorities about the place of

                                 consumption. Under this initiative, the ‘cross border’ concept refers to transactions where the
consumer is in a Member State and the supplier is in another Member State or in a third
country, or in a third territory. Domestic payments are not included in the scope of this
proposal.

Article 243b does not refer to the place of establishment or to the permanent address or usual
residence of the payee and payer. In fact, payment service providers are third parties
compared to the contractual relation between the taxable persons supplying goods and
services and their consumers. For this reason, the information available to payment service
providers when they execute payment services does not necessarily match with the
information taxable persons have on their consumers or with the information necessary to
establish the place of taxable transaction. The location only triggers the record-keeping
obligation of payment service providers pursuant to Article 243b.

The rules to determine the location of the payees and of the payers are laid down in the
proposed article 243c (see _infra_ ).

In order to capture only the payments that are potentially linked to an economic activity (thus
excluding cross-border fund transfers executed for private reasons) a ceiling linked to the
number of cross-border payments received by a payee is provided for. Only when the total
amount of payments received by a given payee exceeds the ceiling of 25 payments in a
calendar quarter (that is also the reporting period for payment service providers) will the
payment service provider have to keep records on that payee available to tax authorities. The
ceiling was decided by taking into account an average value of online shopping orders of
EUR 95 [40] . 100 payment transactions per year of that value every year will result in almost
EUR 10 000 in sales, which can already give rise to VAT obligations in the Member States.

37 Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on
payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and
2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (Text with EEA
relevance) (OJ L 337, 23.12.2015, p. 35).
38 ‘Payee’ means a natural or legal person who is the intended recipient of funds which have been the
subject of a payment transaction (Article 4(9) PSD2).
39 ‘Payer’ means a natural or legal person who holds a payment account and allows a payment order from
that payment account or, where there is no payment account, a natural or legal person who gives a
payment order (Article 9(8) PSD2).
40 [https://www.statista.com/statistics/239247/global-online-shopping-order-values-by-device](https://www.statista.com/statistics/239247/global-online-shopping-order-values-by-device)

### EN 11 EN

This amount also matches the EUR 10 000 threshold on intra-EU supplies introduced by the
VAT E-commerce Directive.

The record-keeping period for the payment service providers would be 2 years. This recordkeeping period is proportionate, considering the massive volume of information at stake, its
high sensitivity in terms of data protection and the time necessary for tax authorities to detect
VAT fraud.

Article 243c, refers to the rules that payment service providers must apply to determine the
location of the payers and payees as mentioned before. Article 243c does not lay down rules
to establish the place of taxation, but instead lays down rules to establish the location of the
payee and payers so as to apply the record-keeping obligation pursuant to Article 243b of the
VAT Directive.

Furthermore, Article 243c does not imply the transmission of the information used to
determine the location of the payer to the tax authorities. This information will remain with
the payment service provider.

Pursuant to paragraph 1, the location of the payer will be considered as being in the Member
State indicated by the identifier of the account of the payer. The Single Euro Payments Area
Regulation [41] establishes the IBAN (International Bank Account Number) as the identifier of
an individual payment account in a Member State. If a payment is executed through a
payment service not falling under the Single Euro Payments Area Regulation (which only
applies to credit transfers and direct debits in euro), the location of the payer may be given by
any other identifier of the payment account of the payer.

There are also payment transactions (i.e. money remittance) where the funds are transferred to
the payee without any payment account being created in the name of the payer. In this case,
the location of the payer will be considered as being in the Member State indicated by the
identifier of the payment service provider acting on behalf of the payer.

Pursuant to paragraph 2, the location of the payee (the beneficiary of the funds) will be
considered as being in the Member State or third country indicated by the identifier of the
payment account where the funds are credited. Should the funds not be credited to any
payment account, then the location of the payee will be considered as being in the Member
State, third country or third territory indicated by the identifier of the payment service
provider acting on behalf of the payee.

Article 243d provides the details of the information to be kept by the payment service
providers referred to in Article 243b. The records contain information to identify the payment
service provider keeping the records, information to identify the payee, and information on
the payments received by the payee. The identification information of the payers is not
included in the record-keeping obligation of the payment service providers as it is not
necessary to detect fraud. Furthermore, payment service providers are not always aware of
whether the payers are taxable persons or merely private consumers. Therefore, when the
threshold of 25 payments in a quarter is exceeded, the payment service providers will have to
keep information referring to all payments received by a given payee, without distinguishing

41 SEPA Regulation (EU) No 260/2012 of the European Parliament and of the Council of 14 March 2012
establishing technical and business requirements for credit transfers and direct debits in euro (OJ L 94,
30.3.2012, p. 22).

### EN 12 EN

between payments received by consumers or taxable persons. This distinction will be a task of
the Member State tax authorities when they analyse the information.

The payment service providers must keep records of any VAT or tax identification number of
the payee if applicable. VAT identification numbers (national or Mini One Stop Shop
identification numbers) are necessary for the tax authorities of the Member States to identify
VAT taxable persons and cross- check their payment information with the respective VAT or
MOSS declarations and payments. The VAT identification of the payee may not be available
to the payment service providers (either because the payee does not have a VAT identification
number or because the payee has a VAT identification number but does not communicate it to
the payment service provider). In case a VAT identification number is not available to the
payment service providers, the tax authorities will have to activate the necessary procedures
(domestic or using administrative cooperation) to find out whether behind the given payee
there is a taxable person and to assess whether there are VAT liabilities.

Finally, the payment service providers must keep information on the payment transaction
itself, such as the amount, currency, date, origin of the payment and indication of any
payment refund.

### EN 13 EN

2018/0412 (CNS)

Proposal for a

**COUNCIL DIRECTIVE**

**amending Directive 2006/112/EC as regards introducing certain requirements for payment**

**service providers**

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 113
thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Parliament [42],

Having regard to the opinion of the European Economic and Social Committee [43],

Acting in accordance with a special legislative procedure,

Whereas:

(1) Council Directive 2006/112/EC [44] lays down the general value added tax (VAT) accounting
obligations for taxable persons.

                                  (2) The growth of electronic commerce (‘e commerce’) facilitates the cross-border supply of goods
and services to final consumers in Member States. In this context a cross-border supply refers
to a situation where VAT is due in one Member State but the supplier is established in another
Member State, or in a third country or third territory. However, fraudulent businesses exploit ecommerce opportunities in order to gain unfair market advantages by evading their VAT
obligations. Where the principle of taxation at destination applies, because consumers have no
accounting obligations, the Member States of consumption need appropriate tools to detect and
control these fraudulent businesses.

(3) In the vast majority of online purchases made by European consumers, payments are executed
through payment service providers. In order to execute a payment transaction, a payment
service provider holds specific information to identify the recipient, or payee, of that payment
together with details on the amount and date of the payment transaction and the Member State
of origin of the payment. This is particularly the case in the context of a cross-border payment
transaction where the payer is located in one Member State and the payee is located in another
Member State or in a third country or third territory. This information is necessary for tax
authorities to carry out their basic tasks of detecting fraudulent businesses and controlling VAT
liabilities. It is therefore necessary that this VAT-relevant information, which is held by
payment service providers, is made available to the tax authorities of the Member States to help
them identify and combat cross-border e-commerce VAT fraud.

42 OJ C,, p. .
43 OJ C,, p. .
44 Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ L 347,
11.12.2006, p. 1).

### EN 14 EN

(4) It is important that payment service providers should be obliged to keep sufficiently detailed
records of certain cross-border payment transactions triggered by the location of the payer and
of the payee as part of this new measure envisaged to fight cross-border e-commerce VAT
fraud. As a result, it is necessary to define the specific concept of the location of the payer and
of the payee and also the means for their identification. The location of the payer and of the
payee should only trigger the record keeping obligation of the payment service providers which
is established in the Union and it should be without prejudice to the rules laid down in this
Directive and the Council Implementing Regulation (EU) No 282/2011 [45] as regards the place
of a taxable transaction.

(5) From information already held by payment service providers, they are able to identify the
location of the payee and the payer in relation to the payment services they execute, based on
an identifier of an individual payment account in a Member State used by that payer or payee.

(6) Alternatively, the location of the payer or the payee should be determined by means of a
business identifier of the payment service provider where it has been acting on behalf of the
payer or the payee. This means of identification should also be used where the funds are
transferred to a payee without any payment account being created in the name of a payer, or
where the funds are not credited to any payment account.

(7) In accordance with Regulation (EU) 2016/679 of the European Parliament and of the Council [46],
it is important that the obligation on a payment service provider, to retain and provide
information in relation to a cross-border payment transaction, should be proportionate and
should only be what is necessary for Member States to fight e-commerce VAT fraud.
Furthermore, the only information relating to the payer that should be retained is where the
payer is located. With regard to information relating to the payee and the payment transaction
itself, payment service providers should only be required to retain and transmit to tax
authorities information which is necessary for tax authorities to detect possible fraudsters and
to carry out VAT controls. Therefore, payment service providers should only be required to
retain records on cross-border payment transactions which are likely to indicate economic
activities. The introduction of a ceiling based on the number of payments received by a payee
over the course of a calendar quarter would give a reliable indication that those payments were
received as part of an economic activity, thereby excluding payments for non-commercial
reasons _._ Where such a ceiling is reached, the accounting obligation of the payment service
provider would be triggered.

(8) Due to the significant volume of information and its sensitivity in terms of the protection of
personal data, it is necessary and proportionate that payment service providers retain records of
the information in relation to cross-border payment transactions for a two-year period in order
to assist Member States fight e-commerce VAT fraud and detect fraudsters. This period
constitutes the minimum necessary for Member States to carry out controls effectively and to
investigate suspected VAT fraud or to detect VAT fraud.

(9) The information to be retained by the payment service providers should be collected by and
exchanged between the Member States in accordance with Council Regulation (EU) No

45 Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 laying down implementing measures for
Directive 2006/112/EC on the common system of value added tax (OJ L 77, 23.3.2011, p. 1).
46 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of
natural persons with regard to the processing of personal data and on the free movement of such data, and
repealing Directive 95/46/EC (General Data Protection Regulation) (OJ L119, 04.05.2016, p.1).

### EN 15 EN

904/2010 [47] which lays down the rules for administrative cooperation and exchange of
information in order to combat VAT fraud.

(10) E-commerce VAT fraud is a common problem for all Member States but individual Member
States do not necessarily have the information to ensure that e-commerce VAT rules are

—
correctly applied and to tackle e-commerce VAT fraud. Since the objective of this Directive,

—
the fight against e-commerce VAT fraud cannot be sufficiently achieved by the Member
States individually due to the cross-border nature of e-commerce and the need to obtain
information from other Member States, but can be better achieved at Union level, the Union
may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of
the Treaty on European Union. In accordance with the principle of proportionality, as set out in
that Article, this Directive does not go beyond what is necessary in order to achieve that
objective.

(11) This Directive respects the fundamental rights and observes the principles recognised by the
Charter of Fundamental Rights of the European Union. In particular, this Directive fully
respects the right of protection of personal data laid down in Article 8 of the Charter. The
payment information retained and disclosed in accordance with this Directive should be
processed only by the anti-fraud experts of tax authorities within the limits of what is
proportionate and necessary to achieve the objective of fighting e-commerce VAT fraud.

(12) The European Data Protection Supervisor was consulted in accordance with Article 42(1) of
Regulation (EU) 2018/1725 of the European Parliament and of the Council [48] and delivered an
opinion on […]… [49]

(13) Directive 2006/112/EC should therefore be amended accordingly,

HAS ADOPTED THIS DIRECTIVE:

_Article 1_

_Amendments to Directive 2006/112/EC_

Directive 2006/112/EC is amended as follows:

(1) Chapter 4 of Title XI is amended as follows:

(a) the following Section 2a is inserted:

_‘Section 2a_

_**General obligations for payment service providers’;**_

(b) the following Articles from 243a to 243d are inserted:

_‘Article 243a_

For the purposes of this Section, the following definitions shall apply:

47 Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in
the field of value added tax (OJ L 268, 12.10.2010, p.1).
48 Regulation (EU) 2018/1725 of the European Parliament and of the Council of 23 October 2018 on the protection
of natural persons with regard to the processing of personal data by the Union institutions, bodies, offices and
agencies and on the free movement of such data, and repealing Regulation (EC) No 45/2001 and Decision No
1247/2002/EC (OJ L 295, 21.11.2018, p. 39).
49 OJ C […], […], p. […].

### EN 16 EN

(1) ‘payment service provider’ means a body listed in points (a) to (f) of paragraph 1 of
Article 1 of Directive (EU) 2015/2366 (*), or a natural or legal person benefiting from
an exemption in accordance with Article 32 of that Directive;

(2) ‘payment service’ means the business activities set out in points (3) to (6) of Annex 1 to
Directive (EU) 2015/2366;

(3) ’payment transaction’ means an act defined in point 5 of Article 4 of Directive (EU)
2015/2366;

(4) ‘payer’ means a natural or legal person as defined in point 8 of Article 4 of Directive
(EU) 2015/2366;

(5) ‘payee’ means a natural or legal person as defined in point 9 of Article 4 of Directive
(EU) 2015/2366;

(6) 'IBAN' means an international payment account number identifier as defined in point 15
of Article 2 of Regulation (EU) No 260/2012 of the European Parliament and of the
Council (**);

(7) ‘BIC’ means a business identifier code as defined in point 16 of Article 2 of Regulation
(EU) No 260/2012.

_______________________________________________________________________

(*) Directive (EU) 2015/2366 of the European Parliament and of the Council of 25
November 2015 on payment services in the internal market, amending Directives
2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and
repealing Directive 2007/64/EC (OJ L 337, 23.12.2015, p. 35).

(**) Regulation (EU) No 260/2012 of the European Parliament and of the Council of 14
March 2012 establishing technical and business requirements for credit transfers and direct
debits in euro and amending Regulation (EC) No 924/2009 (OJ L 94, 30.3.2012, p. 22).

_Article 243b_

1. Member States shall ensure that payment service providers keep sufficiently detailed records
of the payees and of the payment transactions in relation to payment services they execute for
each calendar quarter to enable the competent authorities of the Member States to carry out
controls of the supplies of goods and services which in accordance with the provisions of Title
V are deemed to take place in a Member State.

2. The requirement referred to in paragraph 1 shall apply in circumstances where both of the
following conditions are met:

(a) where funds are transferred by a payment service provider from a payer located in one
Member State to a payee located in another Member State, in a third territory or in a
third country;

(b) in respect of the transfer of funds referred to in point (a), where a payment service
provider executes more than 25 payment transactions to the same payee in the course of
a calendar quarter _._

3. The records referred to in paragraph 1 shall:

(a) be kept by the payment service provider in electronic format for a period of two years
from the end of the year during which the payment transaction was executed;

### EN 17 EN

(b) be made available to the Member States of establishment of the payment service
provider in accordance with Article 24b of Regulation (EU) No 904/2010 (*).

_____________________________________________________________________

(*) Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation
and combating fraud in the field of value added tax (OJ L 268, 12.10.2010, p. 1).

_Article 243c_

1. For the purposes of paragraph 2 of Article 243b and without prejudice to the dispositions of
Title V of this Directive, the location of the payer shall be considered to be in a Member State
corresponding to either:

(a) the IBAN of the payer’s payment account;

(b) the BIC or any other business identifier code that unambiguously identifies the payment
service provider acting on behalf of the payer.

2. For the application of paragraph 2 of Article 243b, the location of the payee shall be
considered to be in a Member State, third country or third territory corresponding to either:

(a) the IBAN of the payee's payment account or any other payment account number
identifier which unambiguously identifies an individual payment account;

(b) the BIC or any other business identifier code that unambiguously identifies the payment
service provider acting on behalf of the payee.

_Article 243d_

1. The records kept by the payment service providers, in accordance with Article 243b, shall
contain the following information:

(a) the BIC or any other business identifier code that unambiguously identifies the payment
service provider;

(b) the name of the payee or the business name, if appropriate;

(c) any VAT identification number of the payee, if available;

(d) the IBAN or any other payment account number identifier which unambiguously
identifies the individual payment account of the payee;

(e) the BIC or any other business identifier code that unambiguously identifies the payment
service provider acting on behalf of the payee where the payee receives funds without
having any payment account;

(f) the address of the payee in the records of the payment services provider;

(g) any executed payment transactions referred to in paragraph 2 of Article 243b;

(h) any executed payment refunds for payment transactions referred to in point (g);

2. The information referred to in points (g) and (h) of paragraph 1, shall contain the following
details:

(a) the date and time of the execution of the payment transaction or of the payment refund;

### EN 18 EN

(b) the amount and the currency of the payment transaction or of the payment refund;

(c) the Member State of origin of the funds received by the payee or on his behalf, the
Member State, third territory or third country of destination of the refund, as
appropriate, and the information used to determine the origin or the destination of the
payment transaction or of the payment refund in accordance with Article 243c.’

_Article 2_

1. Member States shall adopt and publish, by 31 December 2021 at the latest, the laws,
regulations and administrative provisions necessary to comply with this Directive. They shall
forthwith communicate to the Commission the text of those provisions.

They shall apply those provisions from 1 January 2022.

When Member States adopt those provisions, the latter shall contain a reference to this
Directive or be accompanied by such a reference on the occasion of their official publication.
Member States shall determine how such reference is to be made.

2. Member States shall communicate to the Commission the text of the main provisions of
national law which they adopt in the field covered by this Directive.

_Article 3_

This Directive shall enter into force on the twentieth day following that of its publication in the
_Official Journal of the European Union_ .

_Article 4_

This Directive is addressed to the Member States.

Done at Brussels,

_For the Council_

_The President_

### EN 19 EN

**LEGISLATIVE FINANCIAL STATEMENT**

**1.** **FRAMEWORK** **OF** **THE** **PROPOSAL/INITIATIVE**

1.1. Title of the proposal/initiative

1.2. Policy area(s) concerned _(programme cluster)_

1.3. Nature of the proposal/initiative

1.4. Grounds for the proposal/initiative

1.5. Duration and financial impact

1.6. Management mode(s) planned

**2.** **MANAGEMENT** **MEASURES**

2.1. Monitoring and reporting rules

2.2. Management and control system

2.3. Measures to prevent fraud and irregularities

**3.** **ESTIMATED** **FINANCIAL** **IMPACT** **OF** **THE** **PROPOSAL/INITIATIVE**

3.1. Heading(s) of the multiannual financial framework and expenditure budget line(s)
affected

3.2. Estimated impact on expenditure

_3.2.1. Summary of estimated impact on expenditure_

_3.2.2. Estimated impact on appropriations of an administrative nature_

_3.2.3. Third-party contributions_

3.3. Estimated impact on revenue

### EN 20 EN

**LEGISLATIVE FINANCIAL STATEMENT**

**1.** **FRAMEWORK** **OF** **THE** **PROPOSAL/INITIATIVE**

**1.1.** **Title of the proposal/initiative**

Mandatory transmission and exchange of VAT-relevant payment data

PLAN/2017/2023 — TAXUD

**1.2.** **Policy area(s) concerned** _**(Programme cluster)**_

Single Market, Innovation and Digital

**1.3.** **The proposal/initiative relates to:**

 **a new action**

 **a new action following a pilot project/preparatory action** **[50]**

 **the extension of an existing action**

 **a merger or redirection of one or more actions towards another/a new action**

**1.4.** **Grounds for the proposal/initiative**

_1.4.1._ _Requirement(s) to be met in the short or long term including a detailed timeline for_
_roll-out of the implementation of the initiative_

The following milestones are set for the project:

(1) End of 2022 — The central system for collecting data from payment providers
and for the risk analysis is operational;

(2) End of 2024 — Feedback on the use of the payment data, the risk criteria and
the supplementary VAT assessed is provided to the Commission by at least 2/3
of the active users (Member States).

_1.4.2._ _Added value of Union involvement (it may result from different factors, e.g._
_coordination gains, legal certainty, greater effectiveness or complementarities). For_
_the purposes of this point ‘added value of Union involvement’ is the value resulting_
_from Union intervention, which is additional to the value that would have been_
_otherwise, created by Member States alone._

Reasons for action at European level (ex-ante) Member States alone cannot
effectively fight e-commerce VAT fraud. Tax authorities do not have access to
information on business to consumers’ cross-border supplies.

From another perspective, exchanging information between Member States tax
authorities on payment data is not always possible due to legal limitations, which
makes the current administrative cooperation tools rather un-effective in respect to ecommerce VAT fraud.

Expected generated Union added value (ex-post)

A higher VAT compliance level among remote sellers would generate an improved
level playing field for all companies active in the e-commerce sector. Equally, the
improved compliance level would lead to higher VAT revenues and to a lower VAT

gap.

50 As referred to in Article 58(2)(a) or (b) of the Financial Regulation.

### EN 21 EN

For payment providers, the adoption of a single centralised EU-wide system of
collecting VAT-relevant payment data would reduce the risks and costs of reporting
the same information in multiple formats, in every EU Member State.

_1.4.3._ _Lessons learned from similar experiences in the past_

This is a new initiative. However, based on the Mini One Stop Shop project (MOSS)
which developed a common European platform for declaring and paying VAT on
electronic services across Europe, the following considerations can be drawn:

(1) The implementation of the technical solution has to be planned well in
advance, allowing a wide consultation of stakeholders and taking into account
the necessary time and financial resources to develop the new system;

(2) The requirements to store information on long term should be carefully
weighted in terms of costs and benefits;

(3) A good communication campaign should accompany the implementation of the
initiative, in order to help businesses comply with the new reporting
requirements.

Lessons learned from the development of IT systems and the administrative
cooperation under the Fiscalis and Customs programmes will be used. Most notably,
the experience that will be gathered in developing the future Information System for
Customs 2 may be useful in building the risk analysis tools for payment data.

_1.4.4._ _Compatibility and possible synergy with other appropriate instruments_

The funds for the implementation of this initiative will be provided by the Fiscalis

programme.

Finally, the initiative will be implemented in conjunction with the new rules of the
VAT Digital Single Market Package, notably the Council Directive (EU) 2017/2455
of 5 December 2017 amending Directive 2006/112/EC and Directive 2009/132/EC
as regards certain value added tax obligations for supplies of services and distance
sales of goods. The payment data would allow the tax authorities to crosscheck
information declared by marketplaces, platforms or other remote sellers as well as to
verify the application of the EUR 10 000 threshold for intra-EU supplies.

**1.5.** **Duration and financial impact**

 **limited duration**

–  in effect from [DD/MM]YYYY to [DD/MM]YYYY

–  Financial impact from YYYY to YYYY for commitment appropriations and

from YYYY to YYYY for payment appropriations.

 **unlimited duration**

–
Implementation with a start-up period from 2020 to 2023,

–
followed by full-scale operation.

**1.6.** **Management mode(s) planned** **[51]**

 **Direct management** by the Commission

51 Details of management modes and references to the Financial Regulation may be found on DG BUDG
[Website: https://myintracomm.ec.europa.eu/budgweb/EN/man/budgmanag/Pages/budgmanag.aspx](https://myintracomm.ec.europa.eu/budgweb/EN/man/budgmanag/Pages/budgmanag.aspx)

### EN 22 EN

–  by its departments, including by its staff in the Union delegations;

–  by the executive agencies

 **Shared management** with the Member States

 **Indirect management** by entrusting budget implementation tasks to:

–  third countries or the bodies they have designated;

–  international organisations and their agencies (to be specified);

–  the EIB and the European Investment Fund;

–  bodies referred to in Articles 70 and 71 of the Financial Regulation;

–  public law bodies;

–  bodies governed by private law with a public service mission to the extent that

they provide adequate financial guarantees;

–  bodies governed by the private law of a Member State that are entrusted with

the implementation of a public-private partnership and that provide adequate
financial guarantees;

–  persons entrusted with the implementation of specific actions in the CFSP

pursuant to Title V of the TEU, and identified in the relevant basic act.

Comments

The Commission shall be assisted by the Standing Committee on Administrative Cooperation,
on the grounds of art. 58 of Regulation (EU) No 904/2010 and Regulation (EU) No 182/2011
laying down the rules and general principles concerning mechanisms for control by Member
States of the Commission’s exercise of implementing powers.

### EN 23 EN

**2.** **MANAGEMENT** **MEASURES**

**2.1.** **Monitoring and reporting rules**

TAXUD will submit yearly monitoring reports to the Standing Committee on
Administrative Cooperation (SCAC).

**2.2.** **Management and control system(s)**

_2.2.1._ _Justification of the management mode(s), the funding implementation mechanism(s),_
_the payment modalities and the control strategy proposed_

The initiative will be implemented in direct management mode. This management
mode provides the most efficient allocation of financial resources and greatest impact
possible. It offers flexibility and sufficient steering control to the Commission for
yearly allocation of resources.

The initiative will be implemented via procurement by the Commission.

For procurement, the payment modalities are fully aligned with corporate standards
(no pre-financing; all payments are linked to the acceptance of pre-defined
deliverables).

The control system for procurement is based on a thorough ex-ante verification of all
transactions, therefore excluding any error at payment time.

_2.2.2._ _Information concerning the risks identified and the internal control system(s) set up_
_to mitigate them_

The general identified risks related to the implementation of this initiative refer to:

1. Shortage of financial and human resources for the IT solution on the central
repository and on the changes that each Member State has to operate into its national
information systems;

2. The security risks related to the storage and processing of sensitive payment
data;

Risks will be addressed by TAXUD with support from the Member States by the
means of (i) appropriate financing decisions, (ii) extensive consultation on the
technical and functional requirements of the new IT systems as well as by the
consultation of various stakeholders and rigorous analysis by the Commission and
the Standing Committee on Administrative Cooperation of performance indicators
and market trends.

_2.2.3._ _Estimation and justification of the cost-effectiveness of the controls (ratio of ‘control_
_costs ÷ value of the related funds managed’), and assessment of the expected levels_
_of risk of error (at payment & at closure)_

As the financing of the initiative will be done through the Fiscalis programme, the
specific internal control system will apply.

TAXUD will also regularly check on the implementation of the initiative, from both
the business and IT perspectives and will set in place regular management check in
its units in charge of tax administration and fight against fraud as well as in charge of
taxation IT systems

TAXUD has a good record and appropriate experience in implementing large-scale
trans-European IT systems and complex business rules involving all the EU Member

### EN 24 EN

States. Most notably, the experience with both the Fiscalis and Customs programmes
will minimise the risks of error (under 2 %).

The applied control strategy has proven to be effective and efficient under the former
similar initiatives for Customs and the cost of control has shown to be limited.

Considering that similar control systems will be used for this initiative, the
anticipated cost of controls and expected level of risk of error at payment/closure can
be considered cost-effective.

**2.3.** **Measures to prevent fraud and irregularities**

DG TAXUD implements a comprehensive Anti-Fraud Strategy (AFS) leading to
anti-fraud culture within the DG through awareness raising activities on potential
fraud risks and ethical behaviour among DG TAXUD staff.

Considering that the programme will be implemented through procurement, the
provision of the AFS apply (Objective 3 of AFS: ‘Raising awareness on possible
conflict of interest in dealing with external stakeholders such as lobbyists, tenderers,
contractors’). The preventing measures will focus on 1) maintaining records of
contacts with lobbyists, 2) centralised management of procurement procedures and
contacts with tenderers, 3) dedicated training on contacts with lobbyists and will be
particularly applicable to the implementation of the initiative.

Mandatory consultation of the Early Detection and Exclusion System before
awarding contracts (and any financial transaction) will also further discourage
potential fraud and irregularity.

### EN 25 EN

**3.** **ESTIMATED** **FINANCIAL** **IMPACT** **OF** **THE** **PROPOSAL/INITIATIVE**

**3.1.** **Heading of the multiannual financial framework and new expenditure budget**

|Col1|line(s) proposed|Col3|Col4|Col5|Col6|Col7|
|---|---|---|---|---|---|---|
|Heading of<br>multiannual<br>financial<br>framework|Budget line|Type of <br>expenditure|Contribution|Contribution|Contribution|Contribution|
|Heading of<br>multiannual<br>financial<br>framework|Number <br>[Heading……………………… ……………<br>…]|Diff./Non-<br>diff52.|from<br>EFTA<br>countries<br>53 <br>|from<br>candidate<br>countries54 <br>|from third<br>countries|within the<br>meaning of Article<br>[21(2)(b)] of the<br>Financial<br>Regulation|
|1|03.01<br>Single<br>Market<br>— <br>Administrative line<br>03.04 Single Market— Cooperation<br>in the field of taxation (FISCALIS)|Diff.|NO|NO|NO|NO|

52 Diff. = Differentiated appropriations / Non-diff. = Non-differentiated appropriations.
53 EFTA: European Free Trade Association.
54 Candidate countries and, where applicable, potential candidates from the Western Balkans.

### EN 26 EN

**3.2.** **Estimated impact on expenditure**

_3.2.1._ _Summary of estimated impact on expenditure_

EUR million (to three decimal places)

**Heading of multiannual financial**

**<…>** ‘Single Market, Innovation and Digital’
**framework**

|Col1|Col2|Col3|2021|2022|2023|2024|2025|2026|2027|Post<br>2027|TOTAL|
|---|---|---|---|---|---|---|---|---|---|---|---|
|Operational appropriations (split according to<br>the budget lines listed under 3.1)|Commitments|(1)|5,400|5,550|5,235|4,585|4,585|4,585|4,585||**34,525**|
|Operational appropriations (split according to<br>the budget lines listed under 3.1)|Payments|(2)|||||||||**34,525**|
|Appropriations of an administrative nature<br>financed from the envelope of the programme55|Commitments =<br>Payments|(3)||||||||||
|**TOTAL appropriations for the envelope**<br>**of the programme **|Commitments|=1+3|5,400|5,550|5,235|4,585|4,585|4,585|4,585||**34,525**|
|**TOTAL appropriations for the envelope**<br>**of the programme **|Payments|=2+3|||||||||**34,525**|

**Heading of multiannual financial**

7 ‘Administrative expenditure’
**framework**

55 Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former ‘BA’ lines), indirect research,
direct research.

### EN 27 EN

EUR million (to three decimal places)

|Col1|Col2|2021|2022|2023|2024|2025|2026|2027|Post<br>2027|TOTAL|
|---|---|---|---|---|---|---|---|---|---|---|
|Human resources|Human resources|2,244|0,902|0,225|0,225|0,225|0,225|0,225||**4,274**|
|Other administrative expenditure|Other administrative expenditure||||||||||
|**TOTAL appropriations under HEADING**<br>**7 of the multiannual financial framework**|(Total commitments =<br>Total payments)|2,444|0,952|0,276|0,276|0,276|0,276|0,276||**4,774**|

EUR million (to three decimal places)

|Col1|Col2|2021|2022|2023|2024|2025|2026|2027|Post<br>2027|TOTAL|
|---|---|---|---|---|---|---|---|---|---|---|
|**TOTAL appropriations** <br>**across HEADINGS** <br>of the multiannual financial framework|Commitments|7,644|6,452|5,460|4,810|4,810|4,810|8,910||**38,798**|
|**TOTAL appropriations** <br>**across HEADINGS** <br>of the multiannual financial framework|Payments||||||||||

### EN 28 EN

_3.2.2._ _Summary of estimated impact on appropriations of an administrative nature_

–
The proposal requires the use of appropriations of an administrative nature, as

explained below:

EUR million (to three decimal places)

|HEADING 7<br>of the multiannual<br>financial framework|Col2|Col3|Col4|Col5|Col6|Col7|Col8|Col9|
|---|---|---|---|---|---|---|---|---|
|Human resources|2,244|0,902|0,225|0,225|0,225|0,225|0,225|**4,274 **|
|Other administrative<br>expenditure|NA|NA|NA|NA|NA|NA|NA|NA|
|**Subtotal HEADING 7** <br>**of the multiannual**<br>**financial framework**|||||||||

|Outside HEADING 756<br>of the multiannual<br>financial framework|Col2|Col3|Col4|Col5|Col6|Col7|Col8|Col9|
|---|---|---|---|---|---|---|---|---|
|Human resources|||||||||
|Other expenditure <br>of an administrative<br>nature|||||||||
|**Subtotal** <br>**outside HEADING 7** <br>**of the multiannual**<br>**financial framework**|||||||||

The appropriations required for human resources and other expenditure of an administrative nature will be met by
appropriations from the DG that are already assigned to management of the action and/or have been redeployed within the
DG, together if necessary with any additional allocation which may be granted to the managing DG under the annual
allocation procedure and in the light of budgetary constraints.

56 Technical and/or administrative assistance and expenditure in support of the implementation of
EU programmes and/or actions (former ‘BA’ lines), indirect research, direct research.

### EN 29 EN

3.2.2.1. Estimated requirements of human resources

–
The proposal requires the use of human resources, as explained below:

_Estimate to be expressed in full time equivalent units_

|Years|Col2|2021|2022|2023|2024|2025|2026|2027|
|---|---|---|---|---|---|---|---|---|
|** Establishment plan posts (officials and temporary staff)**|** Establishment plan posts (officials and temporary staff)**|** Establishment plan posts (officials and temporary staff)**|** Establishment plan posts (officials and temporary staff)**|** Establishment plan posts (officials and temporary staff)**|** Establishment plan posts (officials and temporary staff)**|** Establishment plan posts (officials and temporary staff)**|** Establishment plan posts (officials and temporary staff)**|** Establishment plan posts (officials and temporary staff)**|
|Headquarters and Commission’s<br>Representation Offices|Headquarters and Commission’s<br>Representation Offices|6|2|0,5|0,5|0,5|0,5|0,5|
|Delegations|Delegations||||||||
|Research|Research||||||||
|** External staff (in Full Time Equivalent unit: FTE)— AC, AL, END, INT and JED** 57 <br>Heading 7|** External staff (in Full Time Equivalent unit: FTE)— AC, AL, END, INT and JED** 57 <br>Heading 7|** External staff (in Full Time Equivalent unit: FTE)— AC, AL, END, INT and JED** 57 <br>Heading 7|** External staff (in Full Time Equivalent unit: FTE)— AC, AL, END, INT and JED** 57 <br>Heading 7|** External staff (in Full Time Equivalent unit: FTE)— AC, AL, END, INT and JED** 57 <br>Heading 7|** External staff (in Full Time Equivalent unit: FTE)— AC, AL, END, INT and JED** 57 <br>Heading 7|** External staff (in Full Time Equivalent unit: FTE)— AC, AL, END, INT and JED** 57 <br>Heading 7|** External staff (in Full Time Equivalent unit: FTE)— AC, AL, END, INT and JED** 57 <br>Heading 7|** External staff (in Full Time Equivalent unit: FTE)— AC, AL, END, INT and JED** 57 <br>Heading 7|
|Financed from<br>HEADING 7 of<br>the multiannual<br>financial<br>framework|- at Headquarters|9|4|1|1|1|1|1|
|Financed from<br>HEADING 7 of<br>the multiannual<br>financial<br>framework|- in Delegations||||||||
|Financed from the<br>envelope of the<br>programme **58 **|- at Headquarters||||||||
|Financed from the<br>envelope of the<br>programme **58 **|- in Delegations||||||||
|Research|Research||||||||
|Other (specify)|Other (specify)||||||||
|**TOTAL**|**TOTAL**|**15**|**6 **|**1,5**|**1,5**|**1,5**|**1,5**|**1,5**|

The human resources required will be met by staff from the DG who are already assigned to management of the action and/or
have been redeployed within the DG, together if necessary with any additional allocation which may be granted to the
managing DG under the annual allocation procedure and in the light of budgetary constraints.

Description of tasks to be carried out:

|Officials and temporary staff|Figures include both staff working on the direct management and<br>implementation of the initiative and staff working on policy areas<br>supported by the initiative.|
|---|---|
|External staff|Figures include both staff working on the direct management and<br>implementation of the initiative and staff working on policy areas<br>supported by the initiative.|

57 AC= Contract Staff; AL = Local Staff; END = Seconded National Expert; INT = agency staff;
JPD= Junior Professionals in Delegations.
58 Sub-ceiling for external staff covered by operational appropriations (former ‘BA’ lines).

### EN 30 EN

_3.2.3._ _Third-party contributions_

The proposal/initiative:

–
does not provide for co-financing by third parties

**3.3.** **Estimated impact on revenue**

–
The proposal/initiative has the following financial impact:

(1) on VAT revenue

EUR million (to three decimal places)

|Budget revenue line:|Impact of the proposal/initiative59|Col3|Col4|Col5|Col6|Col7|Col8|
|---|---|---|---|---|---|---|---|
|Budget revenue line:|**2021**|**2022**|**2023**|**2024**|**2025**|**2026**|**2027**|
|Article …………|NA|NA|NA|NA|NA|NA|NA|

59 As regards traditional own resources (customs duties, sugar levies), the amounts indicated must be net
amounts, i.e. gross amounts after deduction of 20 % for collection costs.

### EN 31 EN