Electronic Services – Get Ready for New VAT Rules

If you supply electronic products (telecommunications, broadcasting and e-services) to non-business customers through online sales, you should start thinking about how you will comply with the new VAT ‘place of supply’ rules that will come into force on 1 January 2015. The rules will apply to sales within the EU, where different rates of output VAT apply.

In simple terms, such sales will now carry VAT at the rate applicable to the country in which the customer is located. So, the sale of a web-based product to a customer in France will carry VAT at 19.6 per cent and that VAT will need to be remitted to the French tax authorities.

For VAT purposes, a customer ‘belongs’ in the country in which they have a permanent address or usually live.

HM Revenue and Customs will be offering a ‘Mini One-Stop Shop’ (MOSS) service, which will assist UK businesses by collecting the VAT they charge on sales in all EU jurisdictions and remitting it for the taxpayer to the appropriate national tax authorities.

Businesses will be able to apply to register for the MOSS service from October 2014 and it will commence operating on 1 January 2015.

Businesses that make intra-EU B2C supplies of telecommunications, broadcasting and e-services which do not avail themselves of the facility will be required to register and account for VAT in every member state in which they have customers. If you will be affected by these changes, take advice now so that you are fully prepared by the time the changes are implemented.