From the beginning of 2024, payment service providers will have to record certain cross-border payments and transmit them to the Federal Central Tax Office (BZSt) on a quarterly basis. Under the Central Electronic System of Payment Information (CESOP), in addition to traditional banks’ obligation to report, this now also applies to savings banks, credit unions, specialized banks or e-money institutions, as well as marketplaces and intermediaries offering payment services.
In recent weeks, we have had numerous discussions with market participants. This was done with the goal of finding out what strategy the various institutions are pursuing with regard to CESOP, and where they stand in terms of implementation. To be noted: some CESOP-related challenges have not yet been fully grasped by the market.
In this article, we will attempt to pick up on and assess some of the widespread market assessments:
→ CESOP will follow later, as the market needs more preparation time
In the financial sector, numerous regulatory projects were given more time in the past. Yet there is no sign of this with CESOP. In fact, the opposite is true: the expert group set up for the establishment of CESOP stresses the need for timely implementation. The Federal Central Tax Office (BZSt), which is responsible for data collection, is also unlikely to show any goodwill in the case of incorrect reports. Only last week, the tax authority published the “DIP” (Digitaler Posteingang – Digital Incoming Mail) interface for the receipt of notifications.
→ CESOP can be solved with Excel and Access
Needless to say, Office tools can also be used to select data that is based on certain criteria. The same applies to generating XML files. However: individual transactions must be processed for CESOP. Depending on the bank’s respective business model, this can be many millions of data records per reporting quarter. A technical assignment of transaction and payee is also required. These requirements cannot be met with technical workarounds via Excel or Access.
In addition: For each CESOP report, there can be an unlimited number of responses from the BZSt and from CESOP itself. The need to manually administrate these and implement the resulting corrections by hand in Office databases results in manual efforts that can hardly be planned.
→ CESOP can be solved like payment transaction statistics
CESOP requires the analysis of individual transactions, which must be clearly aggregated from different systems for customers, and individually reported in an appropriate format, with specific details. In the process, card payments, SEPA credit transfers and a multitude of other payment transaction products must be mutually taken into account, then be converted into a uniform format and enriched with customer/account data.
→ The issue of CESOP is too small to develop a software solution for it
To create the CESOP message, a large number of payment transaction products – often from varying supplier systems and platforms – must be converted into a comparable format and made evaluable. This requires the development of interfaces and business logic. In addition, the determination of the reportable transactions along the reporting threshold requires the legally-secure enrichment of the transaction data with account and customer data. The communication with the BZSt requires the transmission of the report, the processing of the responses and, if necessary, the multiple creation of correction reports. Doing all of this manually is more costly in the long term than acquiring suitable software.
→ Developing your own CESOP solution is cheaper than buying a tool on the market.
The development of a legally-compliant and sustainable CESOP solution requires a high level of professional and technical know-how. It also has to be assumed that CESOP will continue developing in technical and regulatory terms beyond 2024. This requires the continuous provision of specialised technical and IT resources for what actually is a comparatively small topic. An external product solution enables the externalisation of the effort as well as the future-proof further development along the regulatory and technical requirements. What is more, when using an external product solution, you benefit from passed-on economies of scale on the effort side, which cannot be achieved with in-house development.
With the CESOP Compliance Service, you can now implement the EU directive against VAT fraud in a legally-secure and future-proof manner. Our solution can be used for all common payment transaction products, regardless of the underlying systems and platforms. This allows us to tailor our “best in class” CESOP solution to individual institutions and pass on economies of scale in development and operation.
Our service portfolio includes all services necessary for the introduction and long-term operation – including guaranteed implementation of regulatory changes.