Visa’s new regulations regarding Merchant Location Rules and Compliance Program became effective on January 15th. Acquirers are requested to conduct appropriate due diligence and determine correct merchant locations according to customer data. Any merchant located outside the acquirer’s jurisdiction must be transitioned to an acquirer licensed in the appropriate country.
Following the changes, acquires are liable to verify if merchants (including sponsored merchants and payment facilitators) are conducting the business in the country of acquirer’s location. Before issuing a new merchant account an acquiring bank must assure that merchant is compliant with the following requirement:
- The merchant has a permanent location at which the merchant’s employees or agents conduct business activity directly related to providing the cardholder with the goods or services purchased in the specific transaction.
- The merchant assesses sales taxes on the transaction activity in the country of operation.
- Law of the country of operation governs the contract of sale for the transaction.
To sum up, with the day the aforementioned regulations became effective, merchant cannot open an account overseas or in an offshore location, provided that he does not have outlet in a given country.
Visa clarifies that merchants located in European Economic Area (EEA) are not required to establish outlet in other member country to setup a merchant account with a bank located in other EEA country.
Visa also specifies that the following does not satisfy the criteria of permanent location:
- A post office box, mail-forwarding address, the address of the merchant’s law firm, agent or vendor, or an email address.
- The location of a payments or customer-service function, servers or URL, or the presence of a director or investor.