New VAT rules on Digital Services (Mini One Stop Shop)

This sounds like a friendly retail outlet where you might buy a pint of milk on a Sunday evening. In fact it is short-hand for the online portal which UK businesses should use from 2015 to account for VAT they owe in respect of digital services provided to customers in other EU countries.

MOSS is a huge change for the way that digital services are accounted for and is designed to increase the amount collected through VAT across Europe.

For small businesses who provide Digital Services, there will be a significant and time consuming level of complexity to your accounting if you provide any Business to Consumer (B2C) services. If you sell to a private individual in, say, Belgium, you will need to charge VAT at 21%. Finland 24%, Germany 19%, and so on. This may mean that you need to make amendments to your website or online shop in order to charge your customer the correct amount of VAT.

“Digital services” includes a multitude of products such as:

music downloads;

video on demand;

electronic books;

online games;

anti-virus services;

software purchased by download;

charges by online auction sites;

sales of data or images online; and

automated learning or exams.

From 1 January 2015, if you sell a digital service to someone in another EU country, who is not a business (ie an individual, Government body or perhaps a charity), you must account for VAT in the country where that customer belongs. This means you need to charge VAT on your invoice to your overseas customer at the rate that applies in the customer’s country, and then pay that VAT to the tax authority of that country.

As there are 28 EU countries it would be an administrative nightmare to complete a quarterly VAT return in every country in which you have customers. Hence the need for an online portal (MOSS) to do all the VAT accounting and payment in one go.

The VAT MOSS portal is now open for businesses to register (see www.gov.uk/vat-on-digital-services-in-the-eu), but it’s not going to solve all the admin nightmares. For instance:

– you need to know the VAT rates that apply to your products in all the countries you sell to;

– your VAT invoices to customers in other countries must comply with the local regulations – which are NOT the same across the EU;

– VAT-MOSS returns must be made for calendar quarters irrespective of the periods for which you draw up your UK VAT return;

– VAT due under MOSS must be paid electronically by the 20th of the month following the end of the quarter, but payment can’t be made by direct debit;

– the tax authorities for every EU country you sell to can inspect your sales records, which must be retained for 10 years.

You also need to be VAT registered in the UK before you can use the MOSS system. Contact us and let’s talk about what you need to do.

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