What's happening on

01 January 2015

EU VAT laws are changing for electronic service, or ‘e-service’, providers. Today, in line with existing EU VAT rules, the VAT on e-services is charged based on the location of the merchant but, from 01 January 2015, the VAT on e-services must be calculated based on the end customer’s location.

This means that digital goods merchants must tick the following boxes in order to comply:

  • Identify the location of their customers
  • Apply the correct VAT rate
  • Validate VAT numbers for B2B transactions
  • Collect evidence to verify the location of the customer
  • Store evidence for 10 years
  • Create a quarterly EU MOSS return
  • Issue e-invoices
  • Be audit ready

Take a minute to watch our video for a brief explanation of the 2015 EU VAT changes.




Definition of eservices in the EU

The following elements together form an eservice:

  1. service (i.e. not goods)
  2. delivered over Internet or an electronic network
  3. supply is essentially automated or involves only minimal human intervention
  4. it is impossible to ensure in the absence of information technology
    There is also an additional condition, which is not explicitly stated in the legislation, but can be deducted upon the existing EU VAT case-law:
  5. supply is made for consideration (i.e. for payment)

Examples of e-services

The implementing regulation provides some examples of eservices.

These include:

  1. The supply of digitised products generally, including software and changes to or upgrades of software;
  2. Services providing or supporting a business or personal presence on an electronic network such as a website or a webpage;
  3. Services automatically generated from a computer via the Internet or an electronic network, in response to specific data input by the recipient;
  4. The transfer for consideration of the right to put goods or services up for sale on an Internet site operating as an online market on which potential buyers make their bids by an automated procedure and on which the parties are notified of a sale by electronic mail automatically generated from a computer;
  5. Internet Service Packages (ISP) of information in which the telecommunications component forms an ancillary and subordinate part (i.e. packages going beyond mere Internet access and including other elements such as content pages giving access to news, weather or travel reports; playgrounds; website hosting; access to online debates etc.);

Website supply, web-hosting, distance maintenance of programmes and equipment:

  1. Website hosting and webpage hosting;
  2. Automated, online and distance maintenance of programmes;
  3. Remote systems administration;
  4. Online data warehousing where specific data is stored and retrieved electronically;
  5. Online supply of on-demand disc space.

 Supply of software and updating thereof:

  1. Accessing or downloading software (including procurement/accountancy programmes and anti-virus software) plus updates;
  2. Software to block banner adverts showing, otherwise known as Bannerblockers;
  3. Download drivers, such as software that interfaces computers with peripheral equipment (such as printers);
  4. Online automated installation of filters on websites;
  5. Online automated installation of firewalls.

Supply of images, text and information and making available of databases:

  1. Accessing or downloading desktop themes;
  2. Accessing or downloading photographic or pictorial images or screensavers;
  3. The digitised content of books and other electronic publications;
  4. Subscription to online newspapers and journals;
  5. Weblogs and website statistics;
  6. Online news, traffic information and weather reports;
  7. Online information generated automatically by software from specific data input by the customer, such as legal and financial data, (in particular such data as continually updated stock market data, in real time);
  8. The provision of advertising space including banner ads on a website/web page;
  9. Use of search engines and Internet directories.

Supply of music, films and games, including games of chance and gambling games, and of political, cultural, artistic, sporting, scientific and entertainment broadcasts and events:

  1. Accessing or downloading of music on to computers and mobile phones;
  2. Accessing or downloading of jingles, excerpts, ringtones, or other sounds;
  3. Accessing or downloading of films;
  4. Downloading of games on to computers and mobile phones;
  5. Accessing automated online games which are dependent on the Internet, or other similar electronic networks, where players are geographically remote from one

Supply of distance teaching:

  1. Automated distance teaching dependent on the Internet or similar electronic network to function and the supply of which requires limited or no human intervention, including virtual classrooms, except where the Internet or similar electronic network is used as a tool simply for communication between the teacher and student;
  2. Workbooks completed by pupils online and marked automatically, without human intervention.


Time is running out to be compliant

Taxamo

Solution

VAT calculation, storage and reporting

Taxamo provides a real-time Software as a Service (SaaS) solution for compliance with 2015 EU VAT rules on the sale of e-services. It is a unique end-to-end service that enables merchants to achieve compliance with the rule changes, without impacting the existing customer journey.


Taxamo integrates with e-commerce websites and captures all of the required data for EU VAT calculation. Our solution uses a number of data points to identify the customer location – data captured as part of the payment process – and takes care of VAT calculation, evidence collection, EU MOSS settlement and audit services.

  • Identifies customer location
  • Applies correct VAT rate
  • Validates VAT numbers for B2B transactions
  • Collect evidence to verify the location of the customer
  • Securely stores location evidence for 10 years
  • Creates quarterly EU MOSS return
  • Generates audit reports
  • E-invoicing

HOW TAXAMO WORKS

Taxamo takes care of all technical requirements for e-service merchants:



Vat Calculation

  • Identifies EU and Non-EU transactions
  • Collects customer location evidence
  • Validates B2B transactions
  • Real-time VAT calculation across 28 EU States
  • Supports both dynamic and universal pricing







 

Reporting

  • Stores customer location evidence
  • Calculates ongoing VAT liability
  • Provides VAT matrix management
  • Creates quarterly EU MOSS returns
  • Creates audit files for EU tax authorities
  • Securely archives data for 10 years, as mandated









Taxamo’s software technology allows seamless integration with hundreds of software systems. Our solution provides API libraries for all popular technologies and integrates seamlessly with shopping carts and payment systems such as Stripe, Paypal, and many more.

Software Systems


Taxamo is built around a RESTful API, with additional features provided through taxamo.js. Taxamo’s API is fully compatible with Swagger 1.2 specifications and enables bindings for a number of client libraries, including PHP, Python, Java and Node.js, etc.


Leveraging top-class AWS-based architecture and double transaction storage, Taxamo API endpoints are available with 99.99+ % uptime, and once the SSL connection is established, respond in tens of milliseconds.

Please visit our Documentation to learn more about integrating Taxamo with your systems.

Taxamo offers a simple solution to a complex problem. There are a number of benefits for e-merchants:

 


Supports universal & dynamic Pricing

Real-time compliance solution

Integrates with current systems

VAT rate management

Saves evidence safely & securely

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PRICING

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€0.20 per transaction
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2% per transaction (Average €10)
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+ €20 /mo
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Starter Plan
€0.18 per transaction
500 monthly
transactions
€90 a month
+€20 /mo
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Growth Plan
€0.17 per transaction
2,000 monthly
transactions
€340 a month
+€20 /mo
Reporting Suite

Leader Plan
€0.15 per transaction
5,000 monthly
transactions
€750 a month
+€20 /mo
Reporting Suite

Contact Us for Enterprise 5,000+ transactions a month

Reporting Suite Includes…

Collecting & Storing Customer Evidence 
VAT Rate Management 
 Audit Reports
Refund Reports 

24/7 Dashboard Access 
Ongoing VAT liability
EU MOSS VAT Reports
VAT Settlement Reports
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Taxamo offers a simple solution to a complex problem. View the Taxamo dashboard and learn more before making a commitment.

 

2015 Legislation

On 01 January 2015, European Union rules on the calculation of Value Added Tax (VAT) on broadcasting, telecommunications, and e-services are changing. This affects businesses and merchants selling e-services within the EU, as well as non-EU merchants selling into the EU. The goal of these changes is to improve European VAT compliance and level the playing field for all e-service providers.


2015 EU VAT Directive

A number of changes to VAT rules on the place of supply of services were agreed by the EU in 2008 to ensure taxation takes place where services, sold over the internet, are consumed. The change to the place of supply of telecommunications, broadcasting and electronic services (BTE or ‘e-services’) to non-business consumers (‘B2C’) is the last of those changes, and will take effect on 01 January 2015.

This change will mean that suppliers of e-services are obligated to account for VAT in the EU member states where their end customer is located and may become liable to register for VAT in those member states.

Suppliers of e-services affected by the new 2015 EU VAT rules changes must determine the place of supply of those services i.e. the location of the consumer, and need to support their decision by collecting two pieces of non-conflicting evidence.

Businesses will be required to keep records of the information/decision-making processes/systems used to determine the place of taxation, and store transaction data for 10 years after a sale.

All 28 EU member states have signed up to the EU VAT Directive.

Please see the following link for more information – EU Commission website

The Mini One-Stop Shop (MOSS) scheme

To ease the potential administrative burden created by the VAT Directive, the EU Commission has created the Mini One-Stop Shop (MOSS) scheme. MOSS will allow businesses to register with one EU member state and submit a single VAT return and payment each quarter for all their cross-border supplies of digital services.

MOSS is an optional scheme which involves businesses registering with one EU member state to declare all of the EU VAT due from their sales in the EU. In the case of EU businesses, this will, typically, be the member state where they are already established. Non-EU businesses must nominate an EU member state with which to register. If deciding against MOSS, the alternative is to register in every EU member state where the business has customers (non-taxable persons). This option can potentially mean registering with 28 separate tax authorities.

An e-service supplier who opts to use the MOSS scheme will have to submit quarterly VAT returns via a web portal to their nominated EU tax authority (known as the Member State of Identification). The e-service supplier will have to declare all of the VAT charged and collected in the EU member states where their customers are located. The EU VAT payments will be made to the Member State of Identification, which will then transmit the relevant funds to the EU member states where sales took place. This scheme is intended to simplify EU VAT compliance obligations for operators who would otherwise be required to have multiple VAT registrations.

Please see the following link for more information about MOSS – EU Commission website


About Us

Founded on a legacy of entrepreneurship and innovation, Taxamo exists to provide global tax compliance services to e-businesses. The Taxamo team has over 30 years experience in the payments & technology industry and leads the way in technical solutions for e-merchants. Dedicated to designing and implementing revolutionary technology that processes billions of Euros every year, Taxamo’s flagship EU VAT compliance software provides a unique end-to-end solution that ensures merchants are compliant with regulatory requirements as it relates to VAT calculation, evidence collection, invoicing, EU MOSS returns and audit services.

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