CESOP is a tool that helps EU countries more easily identify those liable persons who sell goods or services online in the EU and do not pay VAT from these sales. CESOP is a database containing information on payment recipients and payments. Payment service providers (e.g., banks) based in the EU provide data to the CESOP system. CESOP reporting is quarterly. Payment service providers submitted data for the first time on April 30, 2024, for the period January – March 2024.

 

Reporting Liable Persons Are Not Only Banks

 

Simplified, one might say that the liable persons for CESOP reporting are primarily banks, but the list is much longer. Liable persons for reporting can also be companies that are not regular banks. For example, companies that collect money on behalf of payment recipients (Stripe, PayPal).

 

Three basic requirements must be met for CESOP reporting:

1. The liable person is a payment service provider (credit institutions, e.g., banks, electronic money issuing institutions, digital wallet providers, electronic voucher/card providers, postal institutions, platforms).
2. The liable person performs payment services (transferring funds or money from the payer to the payment recipient).
3. The liable person is involved in processing payments between the payer and the payment recipient, where the payer is in one EU country, the payment recipient is in another EU country, a third territory, or a third country.

Besides the three basic conditions, two more conditions must be met:

1. The liable person only reports cross-border payments (the liable person does not report payments within a single EU country, but must report payments between two EU countries or between an EU country and a third country).
2. The payment service provider has executed more than 25 cross-border payments to a specific payment recipient in a single quarter of the calendar year.

For payments within the EU, payment service providers (e.g., banks) representing the payment recipient (e.g., an online retailer selling footwear to end consumers from other EU countries) report the payments. Payment service providers representing the payer do not report the realized payment. This ensures that payments are not reported twice.

For payments between EU countries and third countries, only payment service providers representing the payer from the EU report the payments (e.g., an EU end consumer approving payment for a purchase of goods from the USA). This rule is logical since payment service providers outside the EU (representing the payment recipient from third countries) are not liable for reporting.

 

CESOP Report

 

Liable persons for reporting submit a quarterly CESOP report no later than the end of the month following the calendar quarter to which the data relate (e.g., the deadline for submitting the CESOP report for the period January – March is April 30). The CESOP report is an XML file with predefined data. The XML file submission is done via eDavki, but special software is required, which is not provided by FURS.

If the XML file is rejected at the national level, the liable person has 30 days to submit a new file with correct data. If the XML file is not rejected and the liable person later discovers errors, they must correct the error within 10 days of discovering it.

 

Practical Example 1

 

An electronic money issuing company based in Germany performs payment services in all EU countries without physical presence. For a Slovenian online retailer, it executed 35 payments from January to March. The payments were credited to the online retailer by various individuals from different EU countries.

Is the electronic money issuing company based in Germany obliged to submit a CESOP report in Slovenia?

Yes, because it executed more than 25 cross-border payments to the benefit of the Slovenian online retailer from January to March.

 

Practical Example 2

 

An electronic money issuing company based in the Netherlands performs payment services in Slovenia, Germany, and Austria. In Slovenia, it executed 1,500 payments to the benefit of an online retailer from China for various individuals.

Is the electronic money issuing company based in the Netherlands obliged to submit a CESOP report in Slovenia?

Yes, because it executed more than 25 cross-border payments by individuals from Slovenia from January to March.

 

Conclusion

 

The goal of CESOP reporting is to obtain data on online sellers of goods and services who do not pay VAT in the EU. The financial administrations of EU countries will more easily find violators. The data from the CESOP system is not directly usable, but it will ensure more efficient work of financial administrations. CESOP reporting is not substantively demanding, but there are certain technical challenges related to the submission of XML files. Slovenia, as one of the few EU countries, has not provided a reporting tool. Liable persons are thus forced to develop their own application or order the reporting service from an external provider.

 

Looking for answers? Contact us or book a meeting. We will find a perfect VAT solution for your business.

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Phone: +386 41 79 30 54

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