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Will non-EU registered companies have to comply with these new rules?
As soon as a non-EU taxable person [company] supplies a digital service to an EU non-taxable persons [private individual] then they are obliged to comply with these new rules.
To comply the non-EU company must be VAT registered. To become VAT registered the company has two options:
- They can register for VAT purposes in each EU Member State where they supply digital services, or
- They can register with the Mini One Stop Shop (or MOSS) as it is known. MOSS allows them to register with any EU Member State to declare all of the VAT collected on pan-EU supplies.
A non-EU company, with no EU registration, is free to choose any EU Member State with which to register with for MOSS purposes.
A non-EU company with a fixed establishment in the EU must register with the MOSS web portal in the EU Member State where they are established. More information here.
If a non-EU company previously used the VAT on E-Services (VOES) scheme, they will still have to register for the new non-union VAT MOSS scheme.
These new regulations were brought in to level the playing field between EU companies and non-EU companies.
Heretofore, EU companies were obliged to charge VAT based on where they were based. For non-EU companies, where they don’t charge VAT, there is a natural competition issue between EU and non-EU companies.
With these new rules EU tax authorities will seek for companies to pay VAT in an effort to level the playing field and make doing business in the EU more competitive.