Group companies watch out! BaFin guidance note severely limits intra-group exemption

Only a few hours after the publication of the new BaFin guidance note on payment services, PayTechLaw called attention to the changes that BaFin has made in its interpretation of the so-called “intra-group exemption”.

The “intra-group exemption” can be found in Art. 3 lit. (n) PSD2. Simply put, it means that payment transactions within a group of companies do not fall within the scope of PSD2. The German Payments Services Supervisory Act (“ZAG”) sets out the same in Sec. 2 para. 1 No. 13 ZAG (i.e. the new ZAG effective from 13 January 2017, before in Sec. 1 para. 10 No. 13 ZAG), which stipulates that payment transactions and related services within a group of companies are not deemed payment services.

According to the legislative notes, the exemption may be applied only to groups that are headed by a parent undertaking having one or more subsidiaries. Horizontal group companies that lack one common parent undertaking are excluded from the exemption.

Former BaFin interpretation

In the past, BaFin had issued guidance on this exemption, explaining that the determining factor for the exemption to apply was that the recipient of the services was part of the same group. In the old guidance note BaFin set out:

The determining factor for the application of the intra-group exemption in situations where payments are arranged between one entity within the group and one entity outside the group is that the recipient of the services is within the group. This may also be the payment recipient. For instance, if one group company executes direct debits for other group companies, this service would fall within the intra-group exemption, to the extent such service would otherwise be regulated as a payment service as execution of direct debits. The reason for this being that the service is rendered solely for other group companies. Granting direct debit mandates from the debtors of a company alone does not constitute a service relationship.”

In a nutshell, this meant that group companies could organize their procurement or billing centrally. One group company was therefore able to manage and pay suppliers for other group companies. Similarly, one group company could collect monies from customers for goods and services sold or rendered by other group companies. So-called “shared services” companies are not the exception but the rule in large companies. Group companies rendering such services to affiliated group companies did not require a payment license. They needed to ensure that they rendered their services only to companies within the same group but not, for instance, to companies in which the group only had a minority shareholding. Payee or payer, on the other hand, were allowed to be outside the group.

The new guidance note on payment services and the intra-group exemption

Now, the law essentially has not changed with regard to the intra-group exemption. However, BaFin changed its interpretation dramatically.

The new guidance note issued on 29 November 2017 sets out that

the ‘intra-group’ exemption is to be interpreted narrowly according to its wording, which covers only payment transactions where both payer and payee are within the same group. Payment transactions “into the group” or “from the group” are not covered by the wording of the law and are therefore not exempted.

This means that if the payer or the payee (e.g. customer or supplier) are outside the group, this exemption does not apply anymore.

Each group company will have to be paid to its own account and, for instance, will have to execute direct debits directly. A central billing entity also needs to make sure that it renders only technical services and does not have control over any of the accounts of the other group companies in order to steer clear of rendering a payment service.

A procurement entity needs to make sure that all contracts are concluded by the relevant entity receiving the goods or services and that payments are made directly by the company receiving the goods or services. Payments from an account of another group company administered by a procurement entity therefore need to be avoided.

A possible solution: a central regulator

One possible solution for completely centralized accounting and procurement companies could be the exemption available to central regulators pursuant to Sec. 2 para. 1 No. 2 ZAG. According to the legislative notes on this exemption, the determining factor for a central regulator is that in principle this entity centrally negotiates the conditions for all customers and/or suppliers itself, even though some scope may remain for input from other group companies.

What’s the consequence?

A lot of work for group companies and it may be the death knell for some “shared services” entities. Group companies will need to carefully review their internal processes to find out whether their organization is still compliant. The modification of SAP or similar systems to new procurement and/or billing processes alone will be a really burdensome task . In case a group company intends to rely on the central regulator exemption, it needs to carefully review whether all criteria are met and if they are supported by their internal processes.

Should you have any questions, please let us know.

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Translation by Aderhold. Citation taken from the former version of the guidance note on the ZAG, which is not available online anymore. Original wording: „Bei der Vermittlung von Zahlungen zwischen einer Stelle innerhalb des Konzerns und einer Stelle außerhalb des Konzerns kommt es für die Anwendung des Konzernprivilegs darauf an, dass der Dienstleistungsempfänger innerhalb des Konzerns steht. Das kann auch der Zahlungsempfänger sein. Zieht z.B. ein Konzernunternehmen für die anderen Unternehmen des Konzerns Lastschriften ein, so fällt dieser Dienst, falls als Lastschriftgeschäft im Sinne des § 1 Abs. 2 Nr. 2 Buchst. a ZAG qualifiziert, unter das Konzernprivileg, denn das Dienstverhältnis besteht allein zu den anderen Konzernunternehmen. Die Erteilung der Berechtigung durch den Lastschriftschuldner allein schafft kein Dienstleistungsverhältnis.“

Translation by Aderhold. The original wording reads: „Die ZAG-Bereichsausnahme „Konzernprivileg“ ist ihrem Wortlaut entsprechend eng dahingehend auszulegen, dass von ihr ausschließlich Zahlungsvorgänge erfasst werden, bei denen sowohl der Zahler als auch der Zahlungsempfänger derselben Konzerngruppe angehören. Zahlungsvorgänge ‚in den Konzern hinein‘ oder ‚aus dem Konzern heraus‘ finden im Wortlaut der Vorschrift keine Stütze und sind von der Bereichsausnahme daher nicht erfasst.“