10 July 2015    |    Taxation

VAT on e-services (MOSS)

VAT: The Mini One Stop Shop (MOSS)

January 2015 may just have come, but for businesses supplying e-services, broadcasting and telecommunications to consumers cross border, now is the time for the introduction of the MOSS.

A version of the MOSS for non EU suppliers has been in use since 2004, but a significant change in the place of supply rules for e-services, broadcasting and telecommunications effective from 1 January 2015 means that both the original MOSS and this second version of the MOSS, often referred to as the Union MOSS will have far wider reach. This is because the place of supply of these services to consumers will shift to the customer’s country so that the rate of VAT charged on these services will be the rate in force in the customer’s country.

The MOSS is not obligatory and suppliers may choose to register for VAT in each of the Member States where they have customers, but with the EU now at 28 members and the varying rules on VAT compliance for non-resident businesses, the MOSS offers a simpler means of accounting for VAT in multiple states.

The MOSS will provide a single VAT return, submitted in the Member State where the supplier belongs for the Union MOSS and where the supplier chooses to register for the Non Union MOSS and reporting and paying VAT due on supplies to non business consumers of e-services, broadcasting and telecommunications services.

For the time being, both the Non-Union and Union MOSS only apply to supplies to non-business customers within this specific sector, but as we move towards a destination-based system of valued added taxation, the MOSS could be the way of the future for all business to consumer cross-border supplies.

The reverse charge mechanism, which shifts the liability to account for tax to business customers, is an effective way to deal with cross-border business-to-business transactions, but it does create complexity within the European VAT system by distinguishing between domestic and cross-border business-to-business transactions. Amongst the proposals on the future of VAT is the creation of a One Stop Shop for all cross border transactions, both business and consumer, and the success or failure of the MOSS will be significant in these further considerations.

If you are in the e-services, telecommunications or broadcasting sector and supply to consumers, or act for clients who are, you need to prepare yourself for the changes in the place of supply rules. Currently, suppliers in these sectors have located themselves in the lowest VAT rate jurisdictions, but from 1 January 2015 these will no longer necessarily be the best place to be. Add to this the software and administrative requirements of charging VAT at multiple rates, and then getting to grips with multiple jurisdiction VAT registrations or MOSS accounting, and a less than 18 month lead-in no longer seems like a long way off.

If you require any assistance, our team at UK VAT Advice is here to help you, please contact us.

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