A few months ago we have started to monitor the up-time and reliability of the VAT Information Exchange System (VIES) hosted by the European Commission. There are some reasons why we felt obliged to do so and we are happy to explain these to you.
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Today we will take a look at the basics of the new Mini One Stop Shop (“MOSS”) VAT registration scheme and compare the EU and non-EU MOSS schemes with their alternative – the “standard” local VAT registration in up to 28 EU countries.
As you are most probably aware companies selling telecom, broadcasting and eservices to B2C customers in the EU will have to charge VAT in the country of the customer and at that country’s VAT rate. This will mean 28 countries and 28 VAT rates (or 56 rates if ebooks and similar eservices will potentially become taxable at reduced VAT rate).
First and the most important fact: These rules are mandatory for any kind of ebusiness, no matter where it is established or has a nexus: in EU, US, China, India, Australia, Switzerland. As soon as a company provides eservices to a non VAT registered EU customer (regardless whether the customer is a legal or a natural person) it is bound by these rules, regardless whether it has a “physical” presence, server or agent in the EU. The customer’s location is the only thing that matters.
This article is again about one of the most frequently asked questions we are facing in our discussions with ebusinesses: What are “B2B” and what “B2C” clients?
The logical and expected explanation would be: B2B are all legal persons and B2C all natural persons / private individuals.
Unfortunately VAT follows its own logic – which is in most cases illogical when considered in everyday content. The above explanation therefore cannot be applied for VAT purposes.
One of the relatively common questions we receive from our ebiz clients these days is very logical: What are eservices? Let’s start with the terminology and follow it up with examples.
There are many different expressions for this kind of services: electronic services, electronically supplied services, digital services, digital products… We will call them eservices – if the European Commission can live with this, so can we. And it is such a nice, short, effective word. Find out more
In 2015 all European countries will charge VAT on all eservices provided to their residents no matter where the eservice provider will be located (i.e. in Europe, America, Asia or elsewhere). This will be the result of the new B2C VAT rules and the technology which will enable to enforce these new rules. The VAT taxation will lead to increased sales prices of digital products (by as much as 27%) and/or decreased the profit margin for the e-businesses. In addition compliance and admin costs will increase as a result of increased tax compliance and reporting procedures. All this will directly impact the profit line. Alternative is even worse – e-businesses not willing to register and charge VAT will be shut out of the European market.
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