I’ve been following Rachel Andrew’s post on EU VAT rules with interest. New laws come into play on the 1st January 2015 which shake up the charging of VAT in various EU Member States.
VAT is charged at the Place of Supply, and it’s this definition which appears to be changing. For electronic services at least, instead of the supplier charging VAT at their domestic rate, they will effectively charge it at the customer’s national rate.
If I (a UK VAT-registered supplier) provide you (a consumer) with a piece of software and you live in the Netherlands, I would apply a VAT charge of 20% – the UK rate.
From 1 January, I would charge 21%, the Dutch rate.
On the face of it, this doesn’t seem so unreasonable. Otherwise, companies will (and do) flock to low-VAT companies to sell their electronic wares. However, there is also an apparent requirement to register in the customer’s country as well, so I (the supplier) would need to be registered for VAT in the UK, in NL, and any other applicable country I happen to supply to.
That’s a pain in the backside for any small business.
However, there does seem to be an alternative solution, called MOSS. This appears to act as a gateway for cross-EU VAT handling, and saves the supplier having to register in each EU country.
The way I’m reading this (usual disclaimer: I am not an accountant) suggests that the government are pushing MOSS quite firmly as the de facto way of trading in Europe for small businesses. Instead of filing with each member state, UK suppliers will use the MOSS system to indicate their supplies to non-UK EU countries. Much simpler, except:
- Place of Supply is still with the customer, so the supplier needs to apply the local VAT rate accordingly.
- MOSS requires 10 years’ of records to be kept. VAT only required six.
- MOSS returns have a shorter deadline than standard UK returns (20 days).
Whichever route is chosen, suppliers will need to make sure they have plans in place to support the new VAT rules come 1 January. Websites need to be updated, procedures need to be reviewed and reminders need to be set.
It’s an interesting development and one which affects a great number of small businesses. Rachel has set up a GitHub page to collect and distribute further information. If you are a EU-trading electronic business I’d strongly suggest a look.