Digital Services and the New VAT Rules
From 1 January 2015, businesses selling or providing digital services directly to the consumer such as broadcasting, telecommunications and e‐services will have to declare and account for VAT in the country where the customer is based. The digital supplies will be taxed at the VAT rate in the consumer’s member state.
A good rule intended to clamp down on the internet giants such as Amazon but with consequences for SMEs that were possibly not anticipated.
First of all do be clear that your business supply these digital services? ‘Digital services’ include:
broadcasting ‐ the supply of television or radio programs
telecommunications ‐ fixed and mobile telephony, fax and connection to the internet
e‐services ‐ video on demand, downloaded applications (or ‘apps’), music downloads, gaming, e‐books, anti‐virus software and online auctions
But it does not for example include:
Using the internet to sell tickets for an event
If you use a platform such as Amazon to sell your products – they then are responsible.
But before you panic read on…..
If your business supplies digital services to consumers (B2C), it is you supplying the services that are liable to pay the VAT to the tax authorities.
If you are UK VAT registered, and are making B2C digital service supplies to customers in other EU Member States, you can register for the VAT Mini One Stop Shop (MOSS).
MOSS will enable you to register just once (in the UK) and submit a single MOSS VAT return and payment each quarter for all your cross‐border supplies of digital services. If you register for MOSS to account for the VAT on all your EU cross‐border supplies, you can use the European Commission's EU VAT Web Portal to determine the VAT information (e.g. VAT Rates, VAT Invoicing requirements) in each Member State.
If you are not UK VAT registered, and you are not using a digital platform, store or marketplace to supply digital services, then you will need to:
• Register for VAT in each Member State that you supply digital services, or
• Voluntarily register for VAT in the UK and then use the MOSS
Provided a business organises and operates its cross‐border digital services business entirely separately from its UK domestic business, we understand that HMRC will allow that business to register for VAT so that it can then register to use MOSS but will not have to pay UK VAT.
You will need to determine if your customers are 'taxable persons' who are in business and have provided you with their VAT Registration Number (VRN), or other information that they are in business, because if this is the case, you will be making business‐to‐business (B2B) supplies which will be dealt with under existing EU VAT rules, rather than B2C supplies.
If you do decide to register and use MOSS to account for the VAT on your supplies to customers in other Member States you will need to:
Submit MOSS VAT returns on a calendar quarterly basis, including ‘nil’ returns if you do not make any digital service supplies; be able to determine where a customer is located in order to determine the VAT rate that applies and to complete the MOSS Return, by for example obtaining information such as the customer’s billing address, IP address or telephone number.
More information: VAT on digital services in the EU https://www.gov.uk/vat‐on‐digital‐services‐in‐the‐eu
Register for the VAT Mini One Stop Shop https://www.gov.uk/register‐and‐use‐the‐vat‐mini‐one‐stop‐shop
Guidance on supplying digital services and the VAT Mini One Stop Shop
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