If your business supplies digital services to consumers in other EU countries, you need to be aware of new VAT rules.
On 1 January 2015, HMRC put in place new ‘place of supply’ rules for VAT on the supply of digital services by businesses to consumers in the EU.
The new rules state that all supplies of telecommunications, broadcasting and e-services to consumers will be charged based on the rate of the location of the consumer, rather than the location of the supplier (as has previously been the case).
What is classed as a ‘Digital Service’?
• The supply of television or radio programmes.
• Fixed and mobile telephony, fax and connection to the internet.
• Video on demand, downloaded applications (commonly known as ‘apps’), music downloads, gaming, e-books, anti-virus software and online auctions.
If your business supplies digital services to consumers in the EU, you will have a requirement to VAT register in each country in which your customers are located. However, a streamlined process has been introduced by HMRC which allows you to avoid this. Instead, you can register for HMRC’s new service called VAT MOSS (VAT Mini One Stop Shop).
Once you have registered for the MOSS service, each calendar quarter you submit a single MOSS VAT Return and single payment to HMRC. The relevant parts of the return and payment will then be forwarded to the member state(s) where the consumers are located. This fulfils your VAT obligations without the need for individual registrations in each country.
If you have not done so already, we recommend that you put the processes in place to comply with these new rules sooner rather than later. HMRC have warned that any business that does not comply with the new VAT rules will be excluded from using the MOSS service for 2 years and fined. This means excluded companies will have to register for VAT in each of the EU member states that they supply digital services to.