In February we highlighted the upcoming VAT changes that will affect companies involved in e-commerce, telecommunications, broadcasting and e-services in the EU. From 1 January 2015, sales of these services to non-business customers within the EU will be subject to VAT in each EU country in which its non-business customers are based, rather than where the selling business is based (as is the case under the current rules).
If your company provides such services, it is not too late to get your house in order before 1 January 2015. The new rules mean that companies may need to register for VAT in each EU jurisdiction that they have non-business customers (this could require up to 28 separate VAT registrations and 28 separate quarterly VAT returns).
Alternatively, businesses could use the “mini-one stop shop” (MOSS) VAT registration process, which will allow them to register once in the EU jurisdiction of their choice and account for VAT due in all other member states online in a single return. Businesses will be able to register for the VAT MOSS from 20 October 2014 in the UK.
What do businesses affected by these rules need to do?
- Identify their services that fall within the new rules and who they are sold too. This change will affect pricing strategies and margins and therefore consideration of global or local pricing strategies should be undertaken.
- Ensure front and back office systems are capable of allowing the business to identify the geographic location and identity of its customers in a way which complies with the EU rules. This will be key in identifying the correct VAT rate to be applied.
- Data protection laws in each country will need to be considered when gathering customer’s personal information in order to identify their location.
- Decide whether to register under the MOSS and in which jurisdiction. In most cases it will make sense to register under the MOSS as it will greatly reduce the administration burden of filing tax returns in each EU jurisdiction that supplies are made. The choice of jurisdiction may be influenced by considerations such as the language in which forms may be submitted and the ease of dealing with local tax authorities
Here to help
These changes can seem daunting with many elements to consider and act upon. Should your business need help in dealing with these changes then please contact one of our experts for further information and guidance.