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EU VAT changes: 6 points you need to know

Jul 15 2014 08:41
*Daniel Clark
London - The 2015 VAT changes in the EU will have a major impact on e-merchants and the e-commerce sector as a whole.

The rule changes will affect everything from compliance, accounts, pricing and profit. Businesses that supply broadcasting, telecommunications and electronic services to EU consumers need to prepare now for the rules which come into effect on January 1 2015.

Here are some helpful questions and answers for potentially affected merchants ahead of the 2015 VAT changes:

1. What services do you actually supply?

The only services affected by the 2015 VAT changes are ones that require access to the internet for their delivery. Examples of such services are the download, or streaming of films and music; the download of images; online gaming; virtual classrooms and the download of anti-virus software. If your business supplies any of these services - and there are many more - then you must comply with the new rules.

2. How are these services delivered?

This is a crucial question. The 2015 VAT changes effectively only cover services that require access to the internet to be consumed and enjoyed. For this reason an eBooks downloaded from Amazon comes under the scope of the new rules but the purchase of a physical book from Amazon is not. Any service delivered via the internet to an EU consumer is more than likely affected.

3. Where are your customers?

The new 2015 VAT changes only apply to digital services consumed by a customer located in the EU.

4. What do I do if I have answered yes to these three questions?

As of from January 2015 you have two options. You can collect and declare VAT collected in all 28 EU member states, or you have the option of registering with the MOSS (mini one stop shop) system.

MOSS allows an e-merchant to register with one EU member state - which will be known as the MSI (Member State of Identification) - to declare all the VAT collected on EU sales of digital services.

The MSI then distributes the relevant VAT to the member states where the sales took place.

5. Will I have to change my pricing structure?

That is a decision that only you can make. Be warned though the new rules will have an effect on pricing.

The VAT rate you charge will vary depending on which EU country your end consumer is.

You have to ask yourself will I charge the same price across the EU (and absorb or pass on the VAT differential) or will I alter pricing dependent on where sales take place.

6. What else will I have to do?

Another element of the 2015 VAT changes is that you will have to store transaction data for ten years.

The data required to be stored includes transaction time and date; VAT rate applied; foreign exchange rate, and amount of VAT charged.

This all adds up to quite a lot of work for e-merchants from January 1 2015 and beyond. Make sure that you are up-to-date with the new 2015 VAT changes and don’t be left behind.

* This guest post is by Daniel Clark, a law practitioner. Stay up to date with the new 2015 VAT changes.

eu  |  tax  |  vat
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