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Briefing document & Podcast: EU VAT Directive 2006/112/EC Explained: ”Accounting” (Art. 241-249)

1 month ago
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SUMMARY

Review of accounting obligations for taxable persons and payment service providers under the EU VAT Directive 2006/112/EC, specifically Title XI, Chapter 4.

Purpose: This document provides a summary and analysis of the key articles within Chapter 4 of Title XI of the EU VAT Directive 2006/112/EC (“Accounting”), focusing on the obligations of taxable persons and payment service providers concerning VAT accounting, record keeping, and invoice storage.

Key Themes and Ideas:

General Accounting Obligations for Taxable Persons:

  • Article 242 mandates that “every taxable person shall keep accounts in sufficient detail for VAT to be applied and its application checked by the tax authorities.” This is a fundamental requirement.
  • Specific record-keeping requirements apply to goods dispatched or transported for valuation, work, or temporary use (Article 243). Also, those involved in “call-off stock arrangements” must maintain specific registers to allow verification by tax authorities.
  • Article 242a focuses on taxable persons facilitating supplies through electronic interfaces (marketplaces, platforms, etc.). These entities are obliged to “keep records of those supplies” sufficiently detailed for tax authorities to verify correct VAT accounting. These records “must be made available electronically on request” and kept for 10 years. This is particularly important for modern e-commerce.

Payment Service Provider (PSP) Obligations:

  • Articles 243a through 243d introduce significant obligations for Payment Service Providers (PSPs) to combat VAT fraud related to cross-border payments.
  • Definitions: Article 243a defines key terms related to PSPs and payments, drawing heavily on Directive (EU) 2015/2366 (Payment Services Directive 2 – PSD2). Examples include “payment service provider,” “payment,” “payer,” “payee,” “IBAN,” and “BIC.”
  • Record Keeping: Article 243b requires Member States to ensure PSPs keep detailed records of payees and payments for each calendar quarter for cross-border payments. This requirement applies only when a PSP provides payment services corresponding to more than 25 cross-border payments to the same payee in a calendar quarter.
  • Cross-border Definition: “A payment shall be considered a cross-border payment when the payer is located in a Member State and the payee is located in another Member State, in a third territory, or in a third country.”
  • Exemption: There’s an exemption where at least one of the payee’s PSPs is located in a Member State. However, the payer’s PSP must still include these payments in their calculation of cross-border payments.
  • Retention: These records must be kept in electronic format for three calendar years from the end of the year of the payment (Article 243b(6)(a)).
  • Data Availability: The data must be made available to the PSP’s home Member State, or host Member States if they operate elsewhere.

Data Requirements: Article 243d specifies the exact information PSPs must record, including:

  • PSP identifiers (BIC, etc.)
  • Payee name/business name and VAT/tax identification number (if available)
  • Payee identifiers (IBAN, etc.) and address (if available)
  • Details of cross-border payments, including date/time, amount/currency, origin/destination, and a unique payment reference.
  • Details of any payment refunds relating to cross-border payments.

Invoice Storage:

  • Article 244 mandates the storage of both issued and received invoices. “Every taxable person shall ensure that copies of the invoices issued by themselves… and all the invoices that they have received, are stored.”
  • Article 245 allows taxable persons to decide the place of storage, as long as invoices are readily available to authorities. Member States can require notification of storage location if it’s outside their territory and may require storage within their territory if not done electronically.
  • Article 247 allows each Member State to determine the storage period for invoices related to supplies in their territory. They can also dictate the original format (paper or electronic) and require that data guaranteeing authenticity and integrity is also stored electronically.
  • Restrictions may be placed on storing invoices in countries without mutual assistance agreements.
  • Article 248 permits Member States to require invoice storage by non-taxable persons, subject to their conditions.

Access to Electronically Stored Invoices:

  • Article 249 grants competent authorities the right to access, download, and use electronically stored invoices (with online access) for control purposes. This right extends to the Member State where the taxable person is established and, if the VAT is due in another Member State, to the authorities of that Member State.
  • Article 248a states that Member States may require translation of invoices into their official languages for control purposes in specific cases. However, a general requirement for translation is prohibited.

Analysis:

These articles of the EU VAT Directive aim to ensure accurate VAT collection and combat fraud through comprehensive accounting, record-keeping, and invoice storage requirements. The inclusion of specific obligations for Payment Service Providers reflects an increasing focus on leveraging financial transaction data to detect and prevent VAT evasion in cross-border transactions, particularly those facilitated by e-commerce. The 10-year retention requirement for records related to electronic interfaces (marketplaces etc.) compared to the 3 year retention requirement for payment service providers signifies the potential complexity and scope of the former. The emphasis on electronic storage and accessibility aligns with the trend towards digitalization and facilitates more efficient tax audits. However, the variations in implementation across Member States (e.g., storage periods, language requirements) can create complexities for businesses operating across the EU.

Articles in the EU VAT Directive 2006/112/EC

CHAPTER 4
Accounting

Section 1
Definition

Article 241
For the purposes of this Chapter, ‘storage of an invoice by electronic means’ shall mean the storage of data using electronic equipment for processing (including digital compression) and storage, employing wire, radio, optical, or other electromagnetic means.

Section 2
General Obligations

Article 242
Every taxable person shall keep accounts in sufficient detail for VAT to be applied and its application checked by the tax authorities.

Article 242a

  1. Where a taxable person facilitates, through the use of an electronic interface such as a marketplace, platform, portal, or similar means, the supply of goods or services to a non-taxable person within the Community in accordance with the provisions of Title V, the taxable person who facilitates the supply shall be obliged to keep records of those supplies. Those records shall be sufficiently detailed to enable the tax authorities of the Member States where those supplies are taxable to verify that VAT has been accounted for correctly.
  2. The records referred to in paragraph 1 must be made available electronically on request to the Member States concerned. Those records must be kept for a period of 10 years from the end of the year during which the transaction was carried out.

Article 243

  1. Every taxable person shall keep a register of the goods dispatched or transported by him, or on his behalf, to a destination outside the territory of the Member State of departure but within the Community for the purposes of transactions consisting of valuations of those goods or work on them or their temporary use as referred to in points (f), (g), and (h) of Article 17(2).
  2. Every taxable person shall keep accounts in sufficient detail to enable the identification of goods dispatched to him from another Member State, by or on behalf of a taxable person identified for VAT purposes in that other Member State, and used for services consisting of valuations of those goods or work on those goods.
  3. Every taxable person who transfers goods under the call-off stock arrangements referred to in Article 17a shall keep a register that permits the tax authorities to verify the correct application of that Article. Every taxable person to whom goods are supplied under the call-off stock arrangements referred to in Article 17a shall keep a register of those goods.

Section 2a
General Obligations of Payment Service Providers

Article 243a
For the purposes of this Section, the following definitions apply:
(1) ‘payment service provider’ means any of the categories of payment service providers listed in points (a) to (d) of Article 1(1) of Directive (EU) 2015/2366 of the European Parliament and of the Council or a natural or legal person benefiting from an exemption in accordance with Article 32 of that Directive;
(2) ‘payment service’ means any of the business activities set out in points (3) to (6) of Annex I to Directive (EU) 2015/2366;
(3) ‘payment’ means, subject to the exclusions provided for in Article 3 of Directive (EU) 2015/2366, a ‘payment transaction’ as defined in point (5) of Article 4 of that Directive or a ‘money remittance’ as defined in point (22) of Article 4 of that Directive;
(4) ‘payer’ means ‘payer’ as defined in point (8) of Article 4 of Directive (EU) 2015/2366;
(5) ‘payee’ means ‘payee’ as defined in point (9) of Article 4 of Directive (EU) 2015/2366;
(6) ‘home Member State’ means ‘home Member State’ as defined in point (1) of Article 4 of Directive (EU) 2015/2366;
(7) ‘host Member State’ means ‘host Member State’ as defined in point (2) of Article 4 of Directive (EU) 2015/2366;
(8) ‘payment account’ means ‘payment account’ as defined in point (12) of Article 4 of Directive (EU) 2015/2366;
(9) ‘IBAN’ means ‘IBAN’ as defined in point (15) of Article 2 of Regulation (EU) No 260/2012 of the European Parliament and of the Council;
(10) ‘BIC’ means ‘BIC’ as defined in point (16) of Article 2 of Regulation (EU) No 260/2012.

Article 243b

  1. Member States shall require payment service providers to keep sufficiently detailed records of payees and of payments in relation to the payment services they provide 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, in order to achieve the objective of combating VAT fraud.
    The requirement referred to in the first subparagraph shall apply only to payment services provided with respect to cross-border payments. A payment shall be considered a cross-border payment when the payer is located in a Member State and the payee is located in another Member State, in a third territory, or in a third country.
  2. The requirement to which payment service providers are subject under paragraph 1 shall apply where, in the course of a calendar quarter, a payment service provider provides payment services corresponding to more than 25 cross-border payments to the same payee.
    The number of cross-border payments referred to in the first subparagraph of this paragraph shall be calculated by reference to the payment services provided by the payment service provider per Member State and per identifier as referred to in Article 243c(2). Where the payment service provider has information that the payee has several identifiers, the calculation shall be made per payee.
  3. The requirement laid down in paragraph 1 shall not apply to payment services provided by the payment service providers of the payer with respect to any payment where at least one of the payment service providers of the payee is located in a Member State, as shown by that payment service provider’s BIC or any other business identifier code that unambiguously identifies the payment service provider and its location. The payment service providers of the payer shall nevertheless include those payment services in the calculation referred to in paragraph 2.
  4. Where the requirement for payment service providers laid down in paragraph 1 applies, the records shall:
    (a) be kept by the payment service provider in electronic format for a period of three calendar years from the end of the calendar year of the date of the payment;
    (b) be made available in accordance with Article 24b of Regulation (EU) No 904/2010 to the home Member State of the payment service provider, or to the host Member States when the payment service provider provides payment services in Member States other than the home Member State.

Article 243c

  1. For the application of the second subparagraph of Article 243b(1) and without prejudice to the provisions of Title V, the location of the payer shall be considered to be in the Member State corresponding to:
    (a) the IBAN of the payer’s payment account or any other identifier which unambiguously identifies, and gives the location of, the payer, or in the absence of such identifiers,
    (b) the BIC or any other business identifier code that unambiguously identifies, and gives the location of, the payment service provider acting on behalf of the payer.
  2. For the application of the second subparagraph of Article 243b(1), the location of the payee shall be considered to be in the Member State, third territory, or third country corresponding to:
    (a) the IBAN of the payee’s payment account or any other identifier which unambiguously identifies, and gives the location of, the payee, or in the absence of such identifiers,
    (b) the BIC or any other business identifier code that unambiguously identifies, and gives the location of, the payment service provider acting on behalf of the payee.

Article 243d

  1. The records to be kept by the payment service providers, pursuant to 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 or business name of the payee, as it appears in the records of the payment service provider;
    (c) if available, any VAT identification number or other national tax number of the payee;
    (d) the IBAN or, if the IBAN is not available, any other identifier which unambiguously identifies, and gives the location of, the payee;
    (e) the BIC or any other business identifier code that unambiguously identifies, and gives the location of, the payment service provider acting on behalf of the payee where the payee receives funds without having any payment account;
    (f) if available, the address of the payee as it appears in the records of the payment service provider;
    (g) the details of any cross-border payment as referred to in Article 243b(1);
    (h) the details of any payment refunds identified as relating to the cross-border payments 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 payment or of the payment refund;
    (b) the amount and the currency of the payment or of the payment refund;
    (c) the Member State of origin of the payment received by or on behalf of the payee, the Member State of destination of the refund, as appropriate, and the information used to determine the origin or the destination of the payment or of the payment refund in accordance with Article 243c;
    (d) any reference which unambiguously identifies the payment;
    (e) where applicable, information that the payment is initiated at the physical premises of the merchant.

Section 3
Specific Obligations Relating to the Storage of All Invoices

Article 244
Every taxable person shall ensure that copies of the invoices issued by themselves, or by their customer, or, in their name and on their behalf, by a third party, and all the invoices that they have received, are stored.

Article 245

  1. For the purposes of this Directive, the taxable person may decide the place of storage of all invoices provided that he makes the invoices or information stored in accordance with Article 244 available to the competent authorities without undue delay whenever they so request.
  2. Member States may require taxable persons established in their territory to notify them of the place of storage if it is outside their territory. Member States may also require taxable persons established in their territory to store within that territory invoices issued by themselves or by their customers or, in their name and on their behalf, by a third party, as well as all the invoices that they have received, when the storage is not by electronic means guaranteeing full online access to the data concerned.

Article 247

  1. Each Member State shall determine the period throughout which taxable persons must ensure the storage of invoices relating to the supply of goods or services in its territory and invoices received by taxable persons established in its territory.
  2. In order to ensure that the requirements laid down in Article 233 are met, the Member State referred to in paragraph 1 may require that invoices be stored in the original form in which they were sent or made available, whether paper or electronic. Additionally, in the case of invoices stored by electronic means, the Member State may require that the data guaranteeing the authenticity of the origin of the invoices and the integrity of their content, as provided for in Article 233, also be stored by electronic means.
  3. The Member State referred to in paragraph 1 may lay down specific conditions prohibiting or restricting the storage of invoices in a country with which no legal instrument exists relating to mutual assistance similar in scope to that provided for in Directive 2010/24/EU and Regulation (EC) No 1798/2003 or to the right referred to in Article 249 to access by electronic means, to download, and to use.

Article 248
Member States may, subject to conditions which they lay down, require the storage of invoices received by non-taxable persons.

Section 4
Right of Access to Invoices Stored by Electronic Means in Another Member State

Article 248a
For control purposes, and as regards invoices in respect of supplies of goods or services supplied in their territory and invoices received by taxable persons established in their territory, Member States may, for certain taxable persons or certain cases, require translation into their official languages. Member States may, however, not impose a general requirement that invoices be translated.

Article 249
For control purposes, where a taxable person stores, by electronic means guaranteeing online access to the data concerned, invoices which he issues or receives, the competent authorities of the Member State in which he is established and, where the VAT is due in another Member State, the competent authorities of that Member State, shall have the right to access, download, and use those invoices.

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