Update in relation to the amendment of the VAT Legislation in relation to the obligations of Payment Service Providers.

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On February 23, 2024, the amending Law No. 4982 of 2024 was published in the Official Gazette of the Republic, which amends the VAT Laws of 2000 until (No. 4) 2023.

The amendment was made for harmonization purposes with the European Directive ((EU) 2020/284) which refers to the obligations of Payment Service Providers (hereinafter ‘PSP’).

Part A: General information in relation to the Amending Law

1. Paragraphs 7C and 7D are added immediately after paragraph 7B of Article 45

1(a): New paragraph 7C of Article 45

Paragraph 7C provides for the imposition of a monetary penalty of €15,000 if PSP’s do not comply with the obligation to maintain and submit detailed information and records of beneficiaries and payers in relation to payment services (hereinafter ‘PS’) they provide, as described in the Regulations based on Paragraph 5A of Schedule Ten. Detailed records should be submitted to the Tax Department (TD) each calendar quarter by the end of the following month of the calendar quarter to which the payments relate.

Regulation 3(1) pursuant to Paragraph 5A of Schedule Ten

3.-(1) Payment service providers shall keep detailed records of payees and payments in relation to the payment services they provide for supplies of goods and services which are considered to be delivered or provided in another Member State, in accordance with the provisions of articles 10 and 10A of the Law and submit them to the Tax Commissioner, for each calendar quarter, no later than the end of the month following the calendar quarter to which the payments relate.

1(b): New paragraph 7D of Article 45

PSPs that do not comply with the provisions of the regulations of paragraph 5A of Schedule Ten, are subject to a monetary penalty of €15,000.

Paragraph (1) of Regulation 3 (see above) applies to PSPs who provide PSs corresponding to more than 25 cross-border payments during a calendar quarter to the same beneficiary which (number) is calculated in relation to the PSs provided by the PSP per MS and per code identification.

2. Paragraph 11C is added after paragraph 11B of Article 46

Paragraph 11C provides for the imposition of a fine of up to €20,000 or imprisonment of up to 12 months or both if the PSP fails to comply with the provisions of regulations made under paragraph 5A of Schedule Ten.

3. Paragraph 5A is added immediately after paragraph 5 of the Tenth Schedule

The new Paragraph 5A of the Tenth Schedule refers to regulations which make PSPs liable to

  1. keep records of the SPs they carry out,
  2. submit them to the Tax Commissioner (hereinafter ‘TC’)
  3. determine the manner of keeping records as well as their content
  4. provide for different arrangements for different cases of keeping the required records;
  5. provide for the length of time the records will be kept

The obligation to keep records may be fulfilled by maintaining information contained in said records by means that the TC may determine by notification. If the information is kept by the means indicated by the TC, copies of the documents that are part of the record will be admitted as evidence in any civil or criminal proceedings.

Part B: Main points of the Regulations pursuant to Paragraph 5A of Schedule Ten (Obligations of Payment Service Providers – 2024 Regulations)

It is noted that the Regulations, based on paragraph 5A of the 10th Annex, transfer to the Cypriot VAT Legislation the provisions of Directive (EU) 2020/284 of the Council of 18 February, 2020. We recommend that you examine the entire text of the said Regulations.

1. Regulation 2 gives the following important definitions:

  • Payment Service Provider (lists categories of institutions included)
  • Payment Service (which business activities constitute PS)
  • Payment and Payment Transaction
  • Remittance Service
  • Payer and Beneficiary
  • Member State of origin and host
  • Payment Account
  • BIC and IBAN

2. Regulation 3 imposes the obligation on PSP to keep records of the beneficiaries as well as payments in relation to the PS they provide for deliveries of goods and provision of services and to submit them to the TC for each calendar quarter until the end of the following month.

The obligation only applies to PS provided for cross-border payments (when the payer is in one MS and the beneficiary in another MS) and the number of PS in greater than 25 cross-border payments during the calendar quarter to the same beneficiary per MS per identification code of the beneficiary, regardless of whether the beneficiary owns more than one identification code.

Exempted from the obligation to keep records are the PS provided by the payer’s PSP in relation to any payment when at least one of the beneficiary’s PSP is located in a MS as shown by the BIC of the said PSP.

The period of time in which the PSPs are obliged to keep records in electronic form is 3 calendar years from the end of the calendar year of the date of payment and to be available to the Authorities of the PSP’s MS or to the Authorities of the host MS when the PSP provides PS to a MS other than the PSP’s MS.

  1. According to Regulation 4, the place where the payer is located is determined either
    • by the IBAN code of the payer’s payment account or any other code that identifies him or
    • by the BIC code or by any other code that clearly identifies and locates the PSP acting on behalf of the payer

The place where the beneficiary is located is considered to be the MS or a third country or territory corresponding to

  • the beneficiary’s payment account IBAN or any other identification code that clearly identifies and locates the beneficiary, or, in the absence of such identification codes;
  • the BIC code or any other business identification code that clearly identifies and identifies the PSP acting on behalf of the beneficiary.

Regulation 5 describes the information that must be contained in the records that must be kept by the PSP (see Appendix A.).

Regulation 6 enables the TC to issue a notification by which it will determine the way of submitting the records and other details in relation to the implementation of the Regulations.

The Regulations regarding the obligations of the PSP are valid from 1 January 1, 2024

Appendix A: information to be contained in the records kept by PSPs

  • The BIC code or any other business identification code that clearly identifies the payment service provider;
  • the name or business name of the beneficiary as it appears on the payment service provider’s records;
  • if any, any VAT number or other national tax number of the beneficiary;
  • the IBAN code or, if not available, any other identification code that clearly identifies and locates the beneficiary;
  • the BIC code or any other business identification code that clearly identifies and locates the payment service provider acting on behalf of the beneficiary, in the event that the beneficiary receives funds without having a payment account;
  • the payee’s address as it appears in the payment service provider’s records, if any;
  • the details of any payment as provided for in paragraph (1) of Regulation 3;
  • the details of any refunds identified as relating to cross-border payments referred to in sub- paragraph (g).

(2) The information provided for in sub-paragraphs (g) and (h) of paragraph (1) contain the following elements:

  • The date and time of payment or return of payment;
  • the amount and currency of the payment or refund;
  • the Member State of origin of the payment received by or on behalf of the beneficiary, the Member State of destination of the refund, where applicable, and the information used to determine the origin or destination of the payment or the refund of the payment under Regulation 4;
  • any reference which clearly identifies the payment;
  • where appropriate, the information that the initiation of the payment takes place at the merchant’s physical premises.

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