There are some major changes set to be made to the way VAT is accounted for businesses supplying ‘digital services’ to non-business customers within the EU.
Currently, the place of supply is determined by the location of the supplier of the services. From 1 January 2015, the place of supply for these services will be that of the consumer and therefore the value of the digital supplies will be taxed at the VAT rate applicable in the consumer’s Member State.
This means that if you are making supplies of digital services, you will need to become VAT registered in every Member State to which a supply is made.
This also applies to supplies of digital services made to EU businesses for which you do not hold a valid VAT registration number.
To avoid the necessity to register for VAT in multiple Member States, you will have to register for the VAT Mini One Stop Shop ‘MOSS’ before 1 January 2015. Using this registration, you may account for VAT chargeable on supplies to non-business customers belonging anywhere in the EU.
By registering under this scheme, you will make a single VAT return declaring the tax charged in each state to which you supply these services and the rate applicable in the state concerned.
Do the changes affect your business?
The supplies affected are broadcasting, telecommunications and e-services ‘digital services’, which are loosely defined as:
Broadcasting includes the supply of television or radio programs to a schedule by the personal that has editorial control of those programmes.
Telecommunications includes the service of sending and receiving signals by wire, radio, optical or other systems. It includes fixed and mobile telephony fax and connection to the internet.
E-services include video on demand, downloaded applications, music downloads, gaming, e-books, anti-virus software and online auctions.
Where digital supplies are supplied to consumers within the EU, it is you as the supplier that is liable to account for, and pay for, the VAT on the supply.
If you supply digital services to consumers through an online portal, gateway or marketplace, the supply may be to the end consumer or to the platform operator, depending on the terms and conditions of the contract. We would be happy to discuss this with you further if this is relevant to your business.
What to do next
If you think that these changes may apply to you, please contact Chris Downing or Melissa Close without delay.
If a MOSS registration needs to be made, in order for us to assist you in relation to this, or make the application for registration on your behalf before 1 January 2015, please contact us by Wednesday 10th December 2014.
Please note that if you are supplying digital services to non-business customers in the EU, and you do not make a MOSS registration before 1 January 2015, you will need to register for VAT in each Member State to which you make a relevant supply.