The EU place of supply VAT rules will change from 1 January 2015.
The changes impact on business to customer (B2C) supplies including e-services. From 1 January 2015, the place of taxation for certain supplies will be determined by the location of the customer.
To save you having to register for VAT in every EU member state, where you supply broadcasting, telecommunications and e-services, you may opt to use the VAT Mini One Stop Shop online service (VAT MOSS). This will be available on 1 January 2015, but you will be able to register to use it from 20 October 2014.
These are a few of the facts highlighted in the note:
if you supply broadcasting, telecommunications and e-services (digital services) services to businesses only (including those who are self-employed) then these changes do not affect you
if you are a business supplying digital services to consumers, these changes will affect you, so you need to start planning for them now
if you supply digital services to a mix of businesses and consumers, then these changes affect you as far as the supplies to consumers are concerned
if your customer does not provide you with a VAT Registration Number (VRN), and you have no other information that suggests that your customer is in business and VAT registered, you can treat this as a B2C supply
if you supply consumers through an online store or gateway, and the online store or gateway is acting in its own name, then they will normally be considered to be supplying the consumer. This means that the online store or gateway will be responsible for declaring and paying any VAT due. You will be treated as supplying the store and so will be making a business to business (B2B) supply, rather than a B2C supply. If this is the case, these rule changes do not directly affect you.
Currently intra-EU supplies of BTE services to non-business customers are subject to VAT in the member state where the supplier belongs, from 1 January 2015 the place of supply will change to where the customer belongs.
There will be further changes to the agency legislation to reflect these rules for taxable persons acting in their own name on behalf of another when supplying telecommunication or e-services.
The place of supply rule changes could lead to a digital supplier having to register in each member state where they make supplies and suffer the administrative burden that comes with it: that’s a potential of 28 VAT registrations. The VAT MOSS will be implemented from 1 January 2015, giving the supplier an option of registering in just one member state and accounting for any VAT due to any member states through a single MOSS return.
This should remove the incentive for businesses to locate offshore and level the playing field for all BTE suppliers. The aim is to reduce the administrative burden and associated costs of multiple VAT registrations.
There will be additional changes to the place of supply rules to align with other member states and to close minor loopholes used by certain anti-avoidance schemes.