Answer:
Onward payments are funds given to a third party as part of a specific order for onward payment to the beneficiary. The payer does not pay the beneficiary directly but via the third party.
During the period that the funds are retained by the third party for onward payment, they are not considered repayable funds, because they do not relate to funds that have to be repaid at any time. Even if the parties involved have agreed that the transaction may be dissolved under certain conditions, the funds retained by the third party still do not qualify as repayable funds, since there is no repayment obligation.
Link between transaction and payment
Funds retained by a third party for onward payment do not qualify as repayable funds unless the link with the underlying transaction or order no longer exists. As long as this link exists, the funds do not qualify as repayable funds. The link in any case exists if the funds for onward payment are with the third party retaining the funds no longer than necessary from a technical or administrative perspective. A third party retaining funds for onward payment may assume to have retained the funds no longer than necessary from a technical/administrative perspective if the transfer period between the provision of the funds by the sender and the reception by the beneficiary does not exceed five calendar days.
If the funds are retained for more than five calendar days but no longer than necessary from a technical or administrative perspective, regardless of the duration of this period, they do not qualify as repayable funds. However, the longer the duration of the period, the less likely it is that the link between transaction and payment is maintained.
Examples of “necessary from a technical or administrative perspective”
In practice, third parties retaining funds for onward payment may receive funds from multiple debtors and payers for one single creditor. For efficiency reasons, it is often agreed that the third party collects the funds received over a certain period and pays them onwards to the creditor in batches rather than in individual onward payments. In such cases, retaining the funds for a period of e.g. up to one month for efficiency reasons can be considered “necessary from a technical or administrative perspective”. This reasoning becomes less likely if this period is longer than one month, however – barring exceptional circumstances.
Another example concerns the situation in which the onward payer will only transfer the funds to the beneficiary after the latter has completed certain administrative processes in connection with the transaction, such as checking the correctness of the amount to be paid on the basis of invoices. If such a check requires the third party to retain the funds for a longer period, this may be considered “necessary from a technical or administrative perspective”.
If the third party has the freedom to retain the funds as long as it likes without any underlying agreement about the retainment period, this cannot be considered as “necessary from a technical or administrative perspective”.
