VAT – Place of supply changes from 1 January 2015
On 1 January 2015, new VAT place of supply rules come into effect for businesses selling their goods and services to consumers. This change will affect businesses providing telecommunications, broadcasting or electronically supplied services to non-taxable or private customers in EU Member States.
Currently, these services are taxed where the business supplier is established. However, in light of this change, businesses will need to charge and account for VAT in the EU country where the customer belongs, or where the service is consumed.
A “Mini One Stop Shop” (MOSS) will be introduced, giving both EU and non-EU businesses the option of registering for VAT in one single Member State. They will then account for VAT on all supplies to their customers in other EU Member States. The alternative is for businesses to register and account for VAT, at the appropriate rates, in each Member State in which they have customers.
There are advantages and disadvantages to using MOSS:
- One VAT registration required for activity in all Member States
- Less need to keep up to speed with VAT rate fluctuations across the EU
- MOSS inspections can stretch back for 10 years
- More onerous in terms of record keeping due to time limits for inspections
In addition, the change will affect the overall price paid by the consumer and may impact profit margins for businesses. As the Place of Supply shifts to where the customer is based/where the supply is consumed, businesses will have no choice but to charge VAT to the consumer. Currently consumers benefit from lower prices on supplies such as music downloads, as the VAT costs are not passed onto them. This will change from 1 January 2015.
If you would like more information or would like to discuss your tax affairs in general, please contact our Tax Partner, Chris Barrington on the details below:
telephone: 01942 292505