On 1 January 2015, the VAT rules across the EU will change in some cases, with the supply of business to consumer (B2C) broadcasting, telecoms, digital and e-services being subject to VAT in the EU member state where the services are ‘consumed’ – where the customer is resident. These changes are effectively an extension of the VAT on E-services (VOES) rules that have been in force since 2003 for non-EU suppliers.
HMRC has now published its guidance for the UK (http://www.hmrc.gov.uk/news/one-stop-shop.htm).
What does the change mean?
For EU established businesses, currently VAT is accounted for in the member state where the supplier is established. This means that if a UK supplier of downloadable content, such as a game, sells games to customers in other EU member states, it accounts for UK VAT. From 1 January 2015, the UK supplier will be required to account for VAT at the rate applying in the member state where the customer is located.
Rather than registering in every member state, there will be a simplified system whereby businesses can register with their local tax authority and complete a special MOSS VAT return. This represents a significant compliance burden for the supplier as the business will still be required to complete its local VAT return.
What do I need to do?
If your business is EU established and sells the above services to consumers (i.e. non VAT registered customers) then it needs to register for MOSS. The MOSS registration process opens in the UK on 1 October 2014 and businesses are required to account for VAT using the MOSS process from 1 January 2015.
This means from 1 January 2015 you will need to be able to identify the location of your B2C customers as you are required to account for VAT, through your MOSS return, at the local VAT rate in force in the country where the customer is located. Effectively, this means that, if you are in the UK, rather than having one tax code at the UK standard rate for these supplies, your system will need to have 28 tax codes if you have or anticipate having customers in all Member States, identifying the tax rate in each jurisdiction, with sales to customers posted to the correct VAT account. This assumes that all sales will be at the standard rate in each country – if there are any supplies that are subject to VAT at the reduced rate then tax codes will also be required for these supplies.
B2C sales to the 27 other member states will be reported on the MOSS return and the VAT paid to HMRC, based on the applicable VAT rate in each country. B2B and UK (local) B2C sales continue to be reported on the UK(local) VAT return.
MOSS returns cover calendar quarters and may therefore not be co-terminus with your existing UK VAT returns. There is also a tighter filing deadline than UK taxpayers will be used to as the MOSS returns are due on the 20th of the month following the end of the calendar quarter.
HMRC has indicated that UK MOSS returns must be made in sterling and not in euros or any other currency, which again may represent a systems issue for businesses if they are selling in other currencies.
We will blog further regarding the more technical aspects to the rule change and HMRC/EU guidance on these changes. Should you wish to discuss how the above affects your business please contact Sean McGinness on +44(0)1962 735 350, or your usual TVC contact.
