EU VAT changes: Businesses search for answers

Mon Dec 8, 2014

As HMRC emphasises that the law expects e-commerce platforms to take responsibility, even major players like PayPal, eBay and Etsy are failing to fully explain how they will enable businesses to comply with January’s EU wide VAT changes.

8 thDecember 2014: Cork, Ireland – Speaking in a webinar, hosted by on-line VAT compliance specialists Taxamo, HMRC emphasised that they expect e-commerce platforms; payment service providers, web stores and online marketplaces; to manage the technical aspects of VAT accounting for their merchants, when the EU VAT changes for electronic services become law.

EU VAT changes

However with only 23 days to go, customers of PayPal, eBay, Etsy and similar platforms are desperately turning to online forums to get clarification on how these services will implement the changes needed to make it possible to continue to trade legally.

Platforms realise that they have an obligation to make sure they take on the tax accounting responsibility for people selling digital services…” said Andrew Webb of HMRC, he continued, “…if after the 1st January, the position has been left unclear then of course it moves into, potentially a compliance issue that we and other tax authorities would have, with the platform, not with the individuals using the platform…”

Yet major services including, PayPal, eBay and Etsy are still to make statements outlining how they will take the necessary steps to enable businesses using their platforms to comply with new tax law and account for VAT due via the new MOSS (Mini One Stop Shop) system that HMRC have established to simplify compliance.

Replying to concerned users in the Etsy.com support forums Patrick, manager of international support for Etsy.com, said: “*I’m sorry to say that we still have no further news to give you regarding this issue.*” (Source: Etsy seller support forums)

PayPal is offering its customers who know how to use its web developer tools just one of the two pieces of location information that the law require for every transaction under the new rules. They are not, however, offering a way for customers to comply through its normal user interface. (Source: PayPal Technical Support)

EBay have questions being posed in their support forums, but have provided no obvious public statements on the issues raised.

We welcome HMRC’s clarity on the need for the online platform providers to take responsibility for facilitating merchants to trade tax compliantly,” said John McCarthy, CEO of Taxamo. He continued, “However, with the increased level of business awareness, and such clarity from the authorities, there really is no excuse for online sellers being left in the dark over how the platforms and payment services that they rely on are going to deliver what the law requires in order for them to trade legally. With 23 days to go there is still time for the platforms to communicate on how their systems will work to meet the requirements, or should a compliant service not be in place, to integrate an off-the-shelf compliance system, such as our own, to immediately support merchant compliance.”

What are the EU VAT changes that will take place on the 1st of January 2015?

From January 1, 2015, suppliers of broadcasting, telecommunications, and electronic services (BTE) to customers in the EU will have to account for VAT based on where their end customer (non-taxable person) resides. The changes are based on Council Directive 2008/8/EC (the ‘EU VAT Directive’).

In principle these rules already exist for non-EU suppliers, the key change is that EU businesses must now account for VAT on B2C cross-border sales from January 1, 2015. Only B2C sales are affected.

Please visit the European Commission website for more detailed information.

Editor’s note

On the 3rd of December 2014 Taxamo searched the sites mentioned for the most common terms that its own web logs show are being used by business researching the issue and reviewed the statements provided by each site.

Note: Taxamo content is created for guidance only, please consult your local tax advisor.

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