• Digital economy

2015 EU digital VAT: we solve your headaches

It has pained Taxamo to see that many digital services suppliers are thinking of restricting their offerings due to the 2015 EU Digital VAT rules.

Nov 25, 2014

** We didn’t make the the rules but we do have a solution to solve the headaches created by the new 2015 EU Digital VAT rules. **

2015 EU Digital VAT

Time is running out for digital service suppliers to put in place a system that will enable compliance with the 2015 EU Digital VAT rules. Taxamo solves all the complex administration headaches faced by these businesses. Photo: Pixabay

We’re pro-business (our company legacy is one of entrepreneurship over 30 years in the payment and technology space) so it has genuinely pained us to see that many digital services suppliers are contemplating a restriction of their online offerings. Some businesses are even contemplating the nuclear option of closing down their business.

The number of people closing their online shops due to #vatmoss is heartbreaking. Knitting pattern sellers. Quilters. Women on mat leave. — cathredfern (@cathredfern) November 21, 2014

Is a knee-jerk reaction really a solution?

An EU expert group recently likened the digital economy to the era of electrification. It is that important. It is growing rapidly and is ripe for exploitation. Existing digital service providers are on the cusp of a new age in commerce. As Neelie Kroes – former digital commissioner and EU vice-president (term ended in November 2014) – said:

This is no longer about a digital sector, it’s about an entire economy that’s going digital.

Do digital service suppliers really want to turn their back on this potential? Consumers are increasingly mobile and digital-savvy, the growth in the digital economy should excite digital service suppliers. The decision to potentially restrict trade, or that nuclear option of closing down, should not be taken lightly.

The Taxamo solution has been designed with the new rules in mind so digital service suppliers can continue to do what they do best: sell great online products.

2015 EU Digital VAT rules are the result of consensus

The new rules to come into effect on January 1, 2015, are not the brainchild of one particular finance ministry. These rules are the result of EU consensus. Enforcement, though, will be through the EU member states. Why? Well they have a vested interest in enforcement as it will lead to increased VAT take.

EU Member States where there is a large digital service consumer base (such as the UK) will benefit more than others. Remember, the new rules dictate that VAT is accounted for based on where the end consumer is located. The more consumers of digital services in any given country will equal an increased tax take. For example, in the 2014 UK Budget the Chancellor of the Exchequer George Osborne estimated a VAT windfall of £1.2 billion within four years.

The tech sector is forecast to create 46,000 jobs and contribute £12 billion to our economy by 2024 http://t.co/TTgInTBXvE via @CityAM — HEXComputing (@HEXComputing) September 3, 2014

In Ireland, where there are considerably less consumers, the government recently estimated a VAT boost of €100m per annum over the next four years, increasing to €150m per annum from 2019.

Solving the headaches of EU red tape

Given that the new rules are the result of EU consensus any potential change or review must also be by, you guessed it, consensus. That means all 28 EU Member States agreeing to change or review. No EU Member State can act unilaterally here. Which means these rules will become a reality on January 1, 2015.

The admin headaches created by the new rules are consistently referred to as impediments to registering for VAT. There is the requirement to:

  • Collect two pieces of evidence identifying the location of your end consumer.
  • VAT calculation in real-time
  • Validate VAT numbers so as to categorise B2B (and therefore, unaffected) transactions
  • FX conversion (ten EU Member States are not part of the Eurozone)
  • Store transaction data for ten years.
  • E-invoicing, and
  • Quarterly MOSS reports and/or individual member state returns

But what if one solution can rid you of all these headaches and maintain your access to the growing digital economy?

Think of the future benefits, more online shoppers, more growth.

And this is where we come in. Taxamo offers the most comprehensive 2015 EU Digital VAT solution on the market. We have launched our product with competitive pricing and have special rates for small or ‘micro’ businesses.

Our solution enables suppliers of digital services with B2C supplies in the EU to comply with the new rules. Using Taxamo simply takes away the administrative headache of compliance.

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