Tag Archives: international-vat

VAT MOSS (Mini One-Stop Shop) Update – Small businesses

By Marcus Ward 8 December 2014

Further to my article on the introduction of new place of supply rules and the MOSS for B2C supplies of telecoms, broadcasting and other e-services HMRC have now stated its position on smaller businesses.

Under the initial rules, businesses which have income below the UK VAT registration turnover limit of (currently £81,000 pa) would be forced to either register for VAT in each EC Member State in which they made a sale (where the customer belongs), or registering for VAT in the UK in order to use the simplified MOSS procedure.

This would, of course, mean that such a business would lose the benefit of not being UK VAT registered and consequently having to do business in the UK with the addition of UK VAT.

HMRC has now indicated that these smaller businesses will be permitted to separate their UK and EC trading and register for VAT in the UK (so they can use the MOSS) without accounting for UK VAT on their domestic trading as long as their UK turnover remains below the VAT registration threshold.

This is curious (but welcome) since HMRC have always been against disaggregation.

For further information please see my new 2015 rules flowchart

Latest on VAT/GST and International Trade

By Marcus Ward 30 April 2014

This month at a meeting in Tokyo over 250 high level delegates from over 100 countries and international organisations endorsed a framework for applying VAT to cross-border trade. There has been significant concern over the various domestic legislation applied to international trade which can result in transactions being taxed twice, or going untaxed. There has been little, or no co-ordination in the application of VAT and GST worldwide and the aim of the recent Organisation for Economic Co-operation and Development (OECD) summit was to remedy these discrepancies and endorse a new set of OECD guidelines for international trade. The new standards aim to ensure tax neutrality in cross-border transactions and a clearer taxation of B2B trade in services.

Meeting statement (with links to the relevant background) here:http://www.oecd.org/ctp/consumption/statement-of-outcomes-on-vat-gst-guidelines.pdf

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VAT – Changes to the treatment of electronically-supplied services from 2015

By Marcus Ward 24 March 2014

Although it seems some time away, these changes, which come into effect on 1 January 2015, will have a significant impact on any business which provides e-services (wherever in the EC it is based). It is important for suppliers to understand and plan for the new rules; the sooner the better.

What are e-services for VAT purposes? – Broadly these are services usually obtained via the internet and may comprise; films, music, information, software for which the supplier makes a charge.

Are all of these services affected? – No, only B2C services (where the recipients are not in business, eg; an individual). The rules for B2B supplies will not change.

What are the changes? At present, suppliers based in the EC charge VAT at the rate applicable in the EC Member State in which the business is located. Currently, therefore, VAT planning insists that technology companies locate in countries with low VAT rates. However, to combat this, the EC will introduce a rule whereby the place of supply (where VAT is due) changes to where the customer is located (not where the supplier belongs). Consequently, a company currently based in Luxembourg supplying a service which is downloaded by an individual in the UK will charge VAT at 15% (the rate in Luxembourg). From 1 January 2015, the UK recipient will pay VAT at 20% (the UK rate).

Businesses will need to introduce these changes and manage budgets and forecasts to recognise what, on the whole, will be a significant increase in VAT payable. This will, for most businesses result in a reduction in profits or an increase in prices for customers.

As may be seen, this will add considerable complexity for businesses to deal with and with the current penalty regime care must be taken to avoid even further costs. Businesses affected must start to plan for these changes as soon as possible.

Are there any easements available? The new rules change would require EC suppliers to register and account for VAT in every EC Member State where their services are downloaded by non-business customers. In order to avoid this burden a “mini one stop shop” (MOSS) is also being introduced. This will allow suppliers to register just once in their own EU Member State. This single registration will then allow them to account for VAT due in other Member states. HMRC has indicated that businesses will be able to register under the MOSS from October 2014. How this will actually work in practice remains to be seen.

Good luck everybody!

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