New EU B2C VAT rules

Thu Nov 28, 2013

As of the start of 2015 there will be new EU B2C VAT rules for e-service providers. To accompany the new system, e-service providers will have the option of using the single VAT declaration scheme – a mini one-stop shop (MOSS) – or opt to declare VAT separately in each EU member state in which they do business.

MOSS also has two separate optional schemes, one for non-EU businesses and one for EU businesses.

The choice for e-service providers is to opt for the one-stop shop payment schemes or register for VAT in each EU member state where the company does business and report the VAT declaration separately in each EU member state. The latter is an unwieldy and time-consuming option.

EU taxation authorities will hope that the new B2C VAT rules (HMRC information here) will make doing business in the EU less complex and create an even playing field for companies and consumers alike.

Of course, EU businesses will still have to report all other supplies (e.g. sales of goods and other services) by the means of the regular VAT returns as they do today.

Most of the EU member states will welcome these VAT rule changes (others, such as Luxembourg will see it as a threat to their economy). The rule changes have been brought in under the idea of tax harmonisation, essentially the removal of tax competition from within the EU. Therefore, the current trend of e-businesses setting up base in a low VAT member state after 2015 will be redundant. This is because as of from January 1, 2015, the VAT charged is based on the location of the customer not the location of the e-service provider.

MOSS (Mini One Stop Shop):

Two different sub-schemes hide under the common “MOSS” scheme – one sub-scheme for non-EU based business (also called “non-Union scheme”) and another for EU based businesses (also called “Union scheme”). Both sub-schemes have in common that they are optional (i.e. business can choose between MOSS and local VAT registrations) and that as soon as MOSS is chosen it must be applied in all EU countries (no “pick and choose” on individual country level).

Another important fact is that MOSS can be only used to declare the output VAT (i.e. VAT due on sales of telecom, broadcasting and eservice). Input VAT (i.e. VAT charged by suppliers) can be recovered by other means (in most cases via a VAT refund procedure, if applicable).

MOSS for non-EU business (also known as the ‘non-Union scheme’):

Non-EU business will be able to freely choose the EU member state to which it collects VAT and reports to, and to where it wishes to register for MOSS. This is also true today for the existing one-stop shop (OSS) scheme (which has been in use since July 2003). If a non-EU business is already registered for VAT in an EU member state it will not be able to apply the MOSS scheme (nor the existing OSS).

MOSS for EU business (also known as the ‘Union Scheme’):

By default EU-based e-service providers will already be registered for VAT in the country where they are located. They will not be able to freely choose the country of the MOSS registration; this will always be the country where they are located.

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

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