VAT MOSS and Digital Services supplied to consumers in the EU
Do you supply broadcasting services, telecommunications and e-services or digital services to consumers/clients in the European Union? If you do then, from 1 January 2015, VAT-registered businesses that supply EU end-users will be required to abide by new place of supply rules for VAT. This means that the VAT rules and rates that apply in the consumer’s country within the EU will apply.
Oh No! Not more changes to VAT rules!
The ruling has been brought in to stop digital giants working through low VAT countries, but it has caused understandable outcry among SMEs that supply these services. However, to help ease the burden these new rules will undoubtedly introduce to company’s administration, from 1 January 2015, suppliers of these services will be able to make a single payment of VAT for payments they owe across the EU using a single tax return. Otherwise, suppliers can register for VAT in each member state they supply.
There are two choices as a supplier of digital services to EU consumers, either:
- register for VAT in each EU country you supply: the EU Taxation and customs union has just launched a portal that may be of some help to work out the VAT rates of all EU member states:
- Or register to use the VAT Mini One Stop Shop (VAT MOSS) online services
The new procedure, known as the Mini One-stop Shop (MOSS), will replace the special VAT on e-services (VoES) scheme that formerly was available to non-EU businesses in relation to the supply of digital services.
Using VAT MOSS, you can account for the VAT due on your business to consumer (B2C) sales in other EU countries by submitting a single quarterly return and payment to HMRC.
VAT Mini One Stop Shop (MOSS) - What is It?
HMRC will send an electronic copy of the appropriate part of your return, and any payment, to each relevant country’s tax authority.
To which services does MOSS apply?
- Telecommunications and broadcasting services
- Radio and television broadcasting
- Electronically supplied services, including:
- music downloads
- knitting and craft patterns
- downloadable software
- Software as a Service
- webhosting services
- Downloads of training course videos
Record-keeping is important
If you register with VAT MOSS – and we’d suggest that even if you don’t that you keep records and identify your clients by:
- The billing address of the customer
- The Internet Protocol (IP) address of the device used by the customer
- The location of their bank
- The country code of SIM card used by the customer
- The location of the customer’s fixed land line through which the service is supplied
- other commercially relevant information (e.g. product coding information which electronically links the sale to a particular jurisdiction)
What if you’re not VAT registered in the UK?
Very recently a spokesperson for HMRC said: "Businesses below the current VAT registration threshold that can separate their sales to UK customers from sales to EU customers can voluntarily register the cross-border element of their business, and then use that registration number to register for MOSS. This means that their domestic sales will remain VAT free."
Registering for MOSS
The business must register for MOSS itself. This can be done as an add-on to VAT on-line. DNS can then act as your agent and use MOSS when you’re registered.
Some new deadlines
You must submit your VAT MOSS return before:
- 20 April: for returns covering 1 January to 31 March
- 20 July: for returns covering 1 April to 30 June
- 20 October: for returns covering 1 July to 30 September
- 20 January: for returns covering 1 October to 31 December
You won’t be able to submit your VAT MOSS return before the end of the return reporting period.
Paying your VAT MOSS bill
You should pay your VAT MOSS bill either at the same time as submitting your return or before the due date of the return. Quote the payment reference number provided by the online service when you make your payment. HMRC will send you an electronic reminder 10 days after the payment was due if you’ve not paid the full amount.
Please contact your account manager with any questions concerning VAT MOSS and whether you should register.