VAT, GST, consumption tax, sales tax, use tax – no matter what term, or name, is used it is clear that the taxation of the digital economy is growing in popularity.
Here we outline the tax jurisdictions where such destination-based indirect tax rules are in place.
European Union Value-Added Tax (VAT) rate: 28 EU Member State VAT rates - taxation depends on location of the consumer In January 2015 new rules on the taxation of cross-border supplies of digital services to EU-based consumers came into force.
The second VAT Mini One-Stop Shop (MOSS) return is due within 20 days of the end of the second quarter. that is: July 20.
Merchants who have registered with the EU’s new MOSS system are always allowed 20 days from the end of each calendar quarter to submit their VAT MOSS return to their chosen Member State of Identification (MSI).
The MSI is the EU tax authority with which a merchant registers with for the purposes of declaring all of the VAT collected on their pan-EU supplies.
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.
A series of myths have been perpetuated since the new EU digital VAT rules were established. It is time these were shattered.
Before we proceed with our myth demolition let’s get one thing straight: these new rules are going to come into effect on January 1, 2015. This date has already been agreed to by all of the 28 EU Member States – it will not be moved, or postponed.
The EU Commission has just released crucial MOSS invoicing requirements detail for each EU member state ahead of the introduction of new VAT rules on January 1, 2015.
The European Commission has released crucial MOSS invoicing requirements.
These new rules affect the cross-border supply of digital services between a taxable person (supplier) and a non-taxable person (customer) in the EU. The new rules only affect B2C sales of these digital services.
Looking for the definitive list on MOSS registration? Look no further.
MOSS (the Mini One-Stop Shop) is a system designed to – as the EU Commission has previously stated – ‘ease the administrative burden’ on digital service merchants.
MOSS web portals across the EU are opening to accept registrations from merchants ahead of the new EU VAT rules due to come into effect on January 1, 2015.
The tax authorities of member states operate the MOSS web portals.
You asked us and now we answer your questions about the new EU VAT rules. The 20 questions in this blog post were posed by participants – online and in person – during Taxamo’s seminar in London. Our full EU VAT event is online here.
1. How is it determined who is making the digital service supply? Article 9(A) of the implementing regulations outlines who will be affected by these new cross-border rules.
A poll taken during Taxamo’s 100-day countdown to the EU VAT rules event in London has revealed that digital service merchants are still very much in the dark ahead of the introduction of these new rules.
VIEW THE FULL EVENT:
Some 51% answered ‘don’t know’ to the question: could the new rules impact your profitability in 2015? In a further reinforcement of the doubt among digital service merchants some 46% of the poll respondents answered ‘yes’.
New EU VAT rules hit previously exempt UK businesses.
Major VAT rule changes impacting how tens of thousands of UK e-service providers do business in the EU are less than four months away, yet the majority of those affected are unprepared and may be at risk of heavy non-compliance penalties.
Technology provider Taxamo, who offer software that helps companies navigate and process the new rules, say that e-service merchants, many of whom are small-to-medium sized businesses and were previously small enough to be exempt from UK VAT rules, are ill-equipped to deal with the significant obligations that come with the 2015 rules changes.
REFUNDS are a headache for businesses, but also a necessary evil. The prompt refund of transactions or overpayments paints a business in a good light, no matter the industry.
When a business is charged VAT based on the new EU VAT rules they must liaise with the eMerchant and not the EU member state where the sale took place for a refund. Photo: eFile989/Flickr
The reform of EU VAT legislation in relation to the cross-border supply of digital services provides detailed guidance as to how a refund would take place post-2015.
The European Commission has just released MOSS audit guidelines for EU member states.
Interestingly, the guidelines – which are not binding on EU member states – are followed by the initials of all the countries that have agreed to implement them. Thus far none of the guidelines are followed by the initials of all 28 EU member states. France and Italy, for example, have yet to agree to any of the recommended guidelines in relation to the auditing of Mini One Stop Shop (MOSS) registrations.
Beware the EU tax authorities trawling the internet to ensure VAT compliance.
That was one of the messages that was issued loud and clear at the recent HMRC-organised conferenceon the new EU VAT changes.
All eMerchants are on EU tax authorities’ radar. They trawl the web searching for non-compliant companies.
During the afternoon session there was a question from the floor regarding the burden that the new rules will impose on SMEs in the UK.
IN late April 2014 the EU’s expert group on the taxation of the digital economy held their fourth-ever meeting in Brussels. The EU had already taken the first steps towards taxing the digital economy with the 2015 VAT Directive, now the expert group was exploring other sources of digital economy tax.
Internet traffic is doubling every two to three years and mobile internet traffic every year.
The group’s get-togethers ran parallel with the OECD’s own probe into the tax challenges of the digital economy.
THE digital economy is the electrification of the modern era. That is one of the views of an EU expert group on taxing the digital economy which met throughout early 2014.
The EU’s expert group on taxing the digital economy have now held three meetings at EU HQ in Berlaymont. Photo: Getty Images
The group in their summary of the digital economy feel that if certain conditions are met that Information and Communication Technologies could increase productivity and innovation, thus leading to GDP growth in much the same way that electrification did in the late 1800s/early 1900s.
Here are some practical examples of digital services unaffected by the 2015 EU VAT rule change, i.e. services not regarded as being electronically supplied (source: revenue.ie):
Example 1 of digital services unaffected
The supply of a game on a DVD or CD-ROM is not affected by the 2015 EU VAT change.
A supply of
A good, where the order and processing is done electronically
A CD-ROM, floppy disc or similar tangible media
Digital services affected by the 2015 EU VAT change span across the digital economy. Here, we give some practical example of those digital services affected by the new rules to come into effect on January 1, 2015 (source: revenue.ie).
The downloading of electronic services will be vatable from January 1, 2015. Photo: Getty Images
Example 1 of digital services affected: Web site supply, web-hosting and distance maintenance of programmes and equipment
Taxing the digital economy is a priority for tax jurisdictions across the globe but the EU’s attempt may well become the global template. These new rules covering the supply of digital services in the EU come into effect on January 1, 2015.
The expert group on the taxation of the digital economy is up and running. Image from EU Commission website.
This statement was just one of the nuggets mined from a January 2014 meeting of the EU expert group on the taxation of the digital economy.
The VAT explanatory notes (final discussion took place on Monday, February 17) were drafted to provide a better understanding of the legislation adopted by the EU in October 2013. The notes themselves do not replace VAT committee guidelines which has its own role in the process. They are a guidance tool for businesses to clarify the practical application for of the new rules for BTE (broadcasting, telecommunications and electronic services).
The definition of e-services? Surprisingly, the EU VAT directive does not provide a definition, any clarification of what constitutes an e-service is found in the Implementing Regulation 282⁄2011.
The fact that the definition is provided in the regulation means that the EU is able to change the e-services definition faster. This means that the definition might be adjusted sometimes in the future. If you need a technical solution for your e-commerce website to comply with the new EU VAT rules, just contact Taxamo.
The VAT Information Exchange System (VIES) was put in place by the EU to assist in the policing of the new VAT arrangements from January 1, 1993. Under the VIES legislation, all VAT-registered traders who make intra-community supplies of goods must furnish the relevant EU member state tax authorities with a VIES statement listing such supplies.
Under the new VAT system intra-Community supplies of goods are exempt from VAT in the member state of despatch when they are made to a taxable person in another member state who will account for the VAT on arrival.
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.
European legislators hope that the new EU VAT registration system will act as a painkiller to the headaches of doing business in the EU.
The new Mini One-Stop Shop (MOSS) system has been set up to enable digital service providers make a single declaration for B2C (business to customer) VAT. From January 1, 2015, digital service providers will charge VAT in accordance with where their customer is located in the EU.
This post focuses on some basics: what is the difference between B2B clients and B2C clients and how are they dealt with within EU VAT B2C law?
B2B (business to business: commercial transactions between businesses) are all legal persons and B2C (business to consumer: the sale of finished product) are all natural persons/private individuals.
Simply put: B2B (business to business: commercial transactions between businesses) are all legal persons and B2C (business to consumer: the sale of finished product) are all natural persons/private individuals.