VAT MOSS, VAT on Digital Business Demystified
Guest post from VAT International
Do you sell digital services within Europe? Do you know if you are liable for VAT on sales?
VAT MOSS (mini One Stop Shop) came into effect on the 1st of January 2015 in an attempt to prevent big businesses that have established headquarters in lower-VAT regimes from profiting unfairly.
However the implications of this relatively new regulation have trickled down to the SME market and thus created more red tape for companies whose cross-border trade is incomparable with that of the multinationals.We would like to put your mind at rest on any concerns you may have with the VAT MOSS based on the most frequently asked questions we have encountered since inception.
Who should read this?
If you sell digital services to private consumers in the EU then you need to pay VAT on the sales. Instead of registering in each EU country you sell into, VAT MOSS was created so you only need to register in your country of residence and submit a single return and payment for the VAT due in those countries. VAT MOSS is optional but the much easier option.
However, there are many things you should know. See our top five tips below.
Five things you should know about VAT MOSS
There is no threshold for registering. So whether you have £1 or £100,000 worth of sales, you will need to register, even if your sales fall below the UK VAT registration threshold of £83,000 in 2016.
In the UK, businesses have been greatly affected. In particular those sole traders who sell as more of a hobby hence their turnover is very small. Whereas in other EU countries the VAT registration threshold is much lower so many sellers will already be identified for VAT.
From the introduction of VAT MOSS, HMRC has allowed UK businesses that fall below the UK VAT registration threshold to determine customers location based on one piece of information provided to them by their payment service provider. This was introduced as small businesses said it would be very difficult for them to obtain two pieces of evidence.
After months of campaigning, some simplifications have been introduced for businesses that trade below the UK VAT registration threshold. These businesses can use their best judgement to decide where their customer is based. They can use information such as the billing address that the customer provides.
These simplified rules only apply to UK businesses trading below the UK VAT registration threshold.
Get in touch with us if you are one of them.
2) B2B or B2C
If you sell your digital services to other businesses (B2B) then VAT MOSS does not apply to you. It only applies to those who sell digital services to private individuals (B2C). As mentioned before, as a UK seller below the VAT registration threshold, you must collect only one piece of evidence of your customer’s location in order to apply the correct VAT rate to their purchase.
3) How often?
VAT MOSS returns must be filed quarterly. The amount of VAT due must be paid at the same time. Following the submission of the very first MOSS returns (Q1 2015), it emerged that:
- not as many people had registered as expected and a reason given was that many businesses could be unaware of the changes.
- As a result, the amount of VAT paid was lower than expected
- People were not familiar with VAT registration procedures and found difficult to use the dedicated e-portal. This triggered lots of queries which HMRC didn’t answer promptly. If you find yourself in that situation do not hesitate to contact us for assistance.
After the UK’s vote to leave the EU, all VAT laws continued. Once Article 50 of the Lisbon Treaty is triggered and eventually the UK leaves, it can introduce new legislation or update existing ones. At present, it is not yet clear how selling to EU Member States will be affected. The UK Prime Minister has said Article 50 could be triggered by March 2017.
5) Non-EU suppliers
Many non-EU businesses sell their digital services to the EU and some are unaware of VAT legislation.
In their case the EU introduced the VAT MOSS non-Union scheme which replaces the old regime in place till the end of 2014 (VOES – VAT on e-services). The suppliers, established outside the EU may choose to register themselves for VAT in each Member State of the EU where they supply telecommunications, broadcasting and electronic services to consumers.
However the special non-Union scheme allows them to register only once in one EU Member State of their choice and to submit the required VAT return only to this single Member State (Member State of Identification).