AGEFI Luxembourg - novembre 2023
Novembre 2023 47 AGEFI Luxembourg Informatique financière What is your background? How was your firmborn? The team at Kapital came upon the idea when looking to structure their own impact investments, after tryingmultiple different solutions from traditional lawyers to digitized services we felt the currentsolutionsweretorigid,costlyand complex - making a significant barrier to entry for smallermanagers toget started. This frustration led the team to set out andbuild their ownsolutionwitha focus on software and automation - under the idea that if they can remove the barriers to entry, more capital can make its way towards the investments that matter. Couldyoupresent your firm’s offer? Kapitalmakes it easy to raise anddeploy capital into any underlying asset. Our mission is to arm the capital allocators and companies with the tools to help them to structure their investment fun- draises while Kapital handles all the complex admin and legal in the back- ground. Today we offer digitized SPVs that lets Funds, Asset Managers and Founders to structure an array of invest- ment products - including co-investment vehicles with their network, to clearable products like AMC’s which are traded onmajor clearing houses EuroClear and ClearStream. All of this is handled via Kapital’s B2B issuance platform that takes the traditionally costly and com- plex work of investor onboarding, issuance, capital calls, tax reporting and management - and simplifies it into an easy to use and compliant issuer inter- face allowing us to automate and scale our investment services. How different your firm is from the competition ? Kapitalaimstotacklethreeofthekeybot- tlenecks that similarprovidershave tradi- tionally struggled at; Cost, Complexity and Human Error. We do this through buildingsoftwarethatautomatesmuchof thecomplexandtraditionallyanalogpro- cess of investment issuance andmanage- ment allowing us to price ourselves com- petitively, cut the time in structuring in half and reduce human errors across the investment supply chain. How can we concretely support your project? Kapital is now open to Asset Managers, Funds and Founders who are looking to structure their own investments and expandtheirinvestmenthorizon.Ifyou’re currently structuring an investment with your network and look for an uncompli- cated,cost-efficientandcompliantpartner tohelpstructureadeal,weencourageyou toreachouttoourteamtoseeifwecanbe of help. We’re confident both established and emerging managers will find what they’re looking for inKapital’s solutions. What do you propose in terms of sus- tainability? Havingcomefromtheclimateandimpact sector, the teamat Kapital startedoffwith a deep rolodex of funds, founders and assetmanagersinthissectorwhichreflects in the early customer base we’ve built up today. Additionally we’re making it easy for our customers to structuremore com- plicated investment products tied to impact like green bonds for financing cli- mate startups and carbon removal pro- ductsfortradingonmajorclearinghouses. What are yourmainobjectives? We are excited to have been selected as oneof the 20participating startups in this years Fit4Start cohort. This comes at an ideal time for us as we establish our second offices here in Luxembourg and look to further strengthen our customer base across Western European markets. We’ll alsobegrowingour techandadmi- nistrative team here in Luxembourg in line with our next fundraising round later this year. Website:www.kapital.inc InterviewwithArmanANATÜRK, Co-Founder andCamille BOSSEL, Co-Founder &ExecutiveDirector LuxembourgOffice, Kapital "Kapital makes it easy to raise capital into any underlying asset" ©Kapital W ith the continuous deve- lopment of electronic payments, aCentral Elec- tronic Systemof Payment Informa- tion (CESOP), has become an essential tool to fight against VAT fraud at the European level.Accor- ding to theOctober 2023 report “VATGap in the EU” by the Euro- peanCommission, theVATgap for 2021 is expected to be EUR61 bil- lion. In response to this loss for the authorities and the community, the Council adopted a legislative package to combat VAT fraud. Payment data collected by the Member States will be stored and processed in the CESOP database, which the EUwill finance for the benefit ofMember States. Entry into force of CESOP is 1 January 2024 and will have multiple impacts on procedures, operators’ awareness, pay- ment processing, information collection, selectionof data tobe exchanged, format- tingof data inXML reports and reporting to one or several authorities. With less than twomonths togo, this arti- cleoutlinestheimpactsofCESOPonbusi- nesses and the steps necessary for successful implementation. Overview CouncilDirective (EU) 2020/284 (“theDi- rective”) alongside Council Regulation (EU) 2020/283 introducednewrecording and reporting obligations for Payment Service Providers (PSPs) providing pay- ment services within the EU, applicable as of 1 January 2024. In Luxembourg, these new obligations have been intro- duced by the Law of 26 July 2023 trans- posing Council Directive (EU) 2020/284 of 18 February 2020, amendingDirective 2006/112/EC, publishedon2August 2023 in the Official Journal of the Grand- Duchy of Luxembourg. The new regulations aim to tackle VAT fraud, empowering the national authori- tiesofeachMemberStatetocarryoutcon- trols.PSPsmustrecordandreportdataon cross-borderpaymentsfallingwithintheir locallawobligations,usuallymirroringthe Directive. The data collected by different MemberStateswillthenbeexchangedbe- tweenthemandcentralizedinaEuropean database: Central Electronic System of Payment information (CESOP). This data exchangewillenabletaxauthoritiestode- tect potential VAT fraud, by identifying sellers behind websites or marketplaces. All datawill be collected in standardized, butstillcountry-specific,formatsandcon- solidated within the CESOP database for reconciliation at the EU level. Subse- quently, anti-fraud specialists of Member States will have access to the information containedwithin theCESOPdatabase. Who is in scope of the CESOP obligations? Nearlyall PSPs operating inanEUMem- ber State, even those benefiting from the small payment institutions exemption, must comply with CESOP obligations. ReferenceismadetoArticle243aofDirec- tive 2015/2366 (PSD2). The PSPs involved can be classified into four categories: - Credit institutions, which include banks established in Europe and European branches of credit institutions headquar- teredoutside the EU. - E-money institutions, which can cover a wide range of PSPs providing electronic paymentservicessuchaselectronicwallet providers and electronic voucher/card providers. - Payment institutions encompass a wide spectrumofbusinessesthatofferpayment services, such as credit and debit card is- suance, payment acquisition, payment processing, payment initiation, andmore. - Post office giro institutions, which pro- vide payment services. What are theCESOP recording and reporting requirements? PSPs providing payment services within theEUmust document anddisclosepay- mentsonaquarterlybasiswhenallthefol- lowing criteria aremet: 1. The PSPprovides payment services in a Member State of the European Union. This includes legal entities, permanent establishments (PEs), and passported services. 2. A payment is made, which is an in- scopepaymenttype.Broadlyallpayments covered by PSD2 are in scope, such as credit transfers, direct debits, credit cards, e-money and remittances. 3. The payer is located in the European Union. Their location is typically deter- mined by the country identifier, their IBAN or another relevant identifier if an IBANis not involved. 4. The payment is a cross-border transac- tion,eitherbetweentwoMemberStatesor involving a third country. 5. If over 25 cross-border payments are made to the same payee within a calen- dar quarter – the payments can come from anyone and go to the payee. If the payee has many accounts, the PSP must aggregate them. PSPs are required to maintain records of payment activities meeting the above cri- teria along with relevant information using an electronic format. Data must be stored for three years from the end of the calendar year of the date of the payment. In terms of reporting obligations, the CESOP report filingwill have to be filed separately in every EU Member State where the PSP provides payment ser- vices. The report must be submitted electronically and in a specified XML format, determined locally by the rele- vant authorities. For every quarter, the CESOP reporting deadline will be one month after the end of the quarter. The deadline for the first reporting is 30 April 2024, regarding the in-scope pay- ments performed during the first quar- ter of 2024. How to prepare for the go-live? PSPs must address several challenges, which include identifying all payment channels and payment methods used for in-scope transactions and assessing whether the required data for reporting is complete, accurate, and available. They must also understand intragroup relationships and map payment trans- actions to subsidiaries or branches across countries, both within and out- side the European Union. Furthermore, they must aggregate the data and establish rules and criteria for selecting the relevant transactions to be recorded and reported. They should also implement an end-to-end reporting process to produce and send the data in the required XML format to local au- thorities, on a quarterly basis. It may be beneficial for PSPs to leverage existing data warehouse and data reporting processes developed in the context of PSD2 (Fraud Reporting) and PSR (Pay- ment Statistics Reporting). However, it is worth noting that these reporting for- mats only include statistics of transac- tions and do not detail information on a per-transaction basis. Consequently, payment flows involving multiple intermediaries and PSPs offer- ingdifferent services (suchas acquisition, easy access to specific markets, payment concentration, cash pooling, treasury management, cash custody and account maintenance) lead tovarious stakeholder declarations at different stages. The CESOP report filing must be com- pleted separately in each EU Member State where the PSPs have an establish- ment and where they provide their services (so-calledhome andhostMem- ber States). Therefore, numerous PSPs other than banks may have to make re- ports in various jurisdictions. In some instances, they might have to file dis- tinct reports in all 27Member States, re- sulting in a total of 108 reports per year. This not only increases the operational burden but also the need for quality as- surance of the data. Considering the short time remaining before the CESOP regime is fully func- tional and thevaryingpenalties imposed by theEUMember States for tardyor in- accurate reporting, it is crucial for PSPs topromptlydetermine themost effective course of actionandestablish their target operating model to guarantee compli- ance with reporting obligations and as- sociated regulations by January 2024. Innovative target operatingmodels include full or partial outsourcing of the data processing and reporting. This in- cludes identifying and filtering transac- tions, ensuring data quality, creating various reports, submitting to individual or multiple authorities, andmore. Consequences of non-compliance Penalties and sanctions are left to thedis- cretion of Member States. Some Mem- ber States have already announced severe penalties for non-compliance that can be multiple hundreds of thousands of euros per quarterlyperiod. Non-com- pliance with the obligations under CESOP will become expensive due to the obligation to submit CESOP returns in eachMember State. Non-compliancewithCESOPobligations canhaveconsequencesbeyondtaxpenal- ties. For instance, incorrect reporting of personaldata(e.g.,bynotproperlyapply- ing the threshold of 25 payments per quarter) can lead to the violation of pri- vate data and may be treated as a data breach. Conversely, if a PSP fails to com- ply with CESOP, a financial supervisory authority may hold them accountable if thebreach results ina failure to fulfil their legal obligations underAML legislation. ThenewCESOPobligationsaimtoequip taxauthoritieswithbettertoolstocombat VATfraud.PSPswillnowhaveadditional recordingandreportingdutiesregarding relevantpaymenttransactionsoriginating froman EUMember State. The CESOP regime will go live on 1 Jan- uary 2024, in all 27 Member States. PSPs must ensure readiness to monitor the payment activities for CESOP purposes, andsubmittheirreturnscoveringQ12024 transactions before 30April 2024. Time is limited, so seeking the aid of experts and considering the outsourcing of compli- ance tasks can be a valuable asset. Olivier LAMBERT Partner, Indirect Tax Leader Patrice FRITSCH Partner, Tax Eva CONSTANTIN Business Tax Advisory, Senior Manager EY Luxembourg Central Electronic System of Payment information (CESOP): Are you prepared for the go-live?
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