From 1 January 2015 the taxation location of digital services supplied to private individuals (B2C) is set to make a significant change from the location of the supplier of these services, to the location of the individual consumer purchasing them.
Known as the European Union (EU) VAT place of supply of services rules, these new changes will specifically relate to the sale of broadcasting, telecommunication, and digital services to individual consumers within the EU.
If you only sell digital services to other registered businesses (B2B), these changes do not apply to you. If you supply these services to both B2C and B2B customers, these changes only apply to your B2C sales.
Location, Location, Location
Under these new rules you’ll be required to pay the appropriate amount of VAT on your B2C sales for the EU country in which each of your individual customers are located. To help simplify things, the EU Member States have formed an agreement over what you must now do differently, and what records you should start keeping.
The new place of taxation (the location of your customer) depends on a number of factors depending on how, exactly, your service is supplied. An in-depth review of this information can be found in full in this update from HMRC under the heading “Where is the place of taxation?”.
It should be noted that if you’re supplying your customers broadcasting, telecommunication, or digital services via an online store or gateway that’s acting in its own name (it hasn’t been ‘white labelled’ with your branding), they will most-likely be considered the supplier, making it their responsibility to pay VAT in the new way.
The rules will declare that you’re supplying the online store or gateway (B2B transactions), meaning these new rules won’t apply to you.
VAT Mini One Stop Shop (VAT MOSS)
To save you the hassle of registering for VAT in each EU Member State in which you have customers, VAT MOSS online services (available from 1 January 2015, but which you can register for from October) allow you to submit a quarterly VAT MOSS Return alongside payment for all VAT due across all EU Member States.
If you’re a UK business you can use the ‘Union’ VAT MOSS online service in the UK and submit your VAT MOSS Return to HMRC as you would any other VAT Return. HMRC will then forward your payment details (and the relevant payments themselves) to their equivalent body in each of the EU Member States in which you’ve been supplying digital services.
If you’re a non-EU business supplying digital services to individual customers within the EU, you may still use VAT MOSS online services, though the process is slightly different. All the information you need is in the second part of this article by HMRC.
Event Recording
Earlier this year HMRC organised an event in London to give businesses a greater understanding of these upcoming changes, and how the VAT MOSS online services will work. Despite this event having passed, a full recording of the event (plus all the presentations) are available for download for you to go through at your leisure.
Need Advice About the Changes to VAT Place of Supply Rules?
To speak with a professional to discuss the upcoming changes to the place of supply rules for digital services, contact us today on 020 7129 1199 or get in touch with us via our contact page to arrange a complimentary, no-obligation meeting.
This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.