Rule change will come into force from 1 January 2015, affecting VAT charges for broadcasting, telecommunications, and e-services.
The changes will be made to the EU VAT place of supply of services rules involving B2C supplies of broadcasting, telecommunications, and e-services, and will affect businesses that supply digital services to consumers only.
From January, VAT for e-services will be charged according to the country where the consumer receiving the goods/services is located, with the current rules seeing VAT charged based on where the supplier is located rather than the consumer. There will therefore be a need for businesses that supply digital services to consumers in other EU member states to apply the different VAT rates on the supplies for each relevant member state; with Airnews stating that VAT rates can “vary significantly throughout the EU from three percent in Luxembourg to 27 percent in Hungary”.
Affected businesses will also need to register for VAT in those member states. However, to save from having to register separately for each of the 28 member states, businesses can use the VAT Mini One Stop Shop (VAT MOSS), which will be available from 1 January but companies can register with from October 2014.
In preparation for the changes, Airnews suggests that businesses should “advise their suppliers of any specific instructions they may have with regard to implementation of the new rules” and that they should “consider the legal arrangements with suppliers and customers to ensure that the responsibility for dealing with tax and compliance issues is clearly defined”. They should also have a “clear pricing strategy in place”.
Businesses that supply consumers through an online store or gateway that is acting in its own name will be treated as supplying the store rather than the consumer, and so the rules will not directly affect them, with the online store or gateway being responsible for declaring and paying any VAT due.
More information on the VAT changes can be found at http://www.hmrc.gov.uk/posmoss/.