Unusually, this week’s blog post will concentrate on an exclusively technical matter which, I suspect, may catch many providers of telecommunications, broadcasting and electrical services unawares.
Businesses in this field with international and cross-border interests need to prepare adequately for the significant changes to their VAT accounting procedures when they “go live” on 1 January 2015.
These measures are part of a succession of changes affecting the place of supply rules that have been gradually introduced since 2010.
Space does not allow me to go into detail as far as the current VAT treatment of these services is concerned. What is more important is to understand the new rules; in essence, these can be summarised as follows:
From 1 January 2015, telecommunications, broadcasting and electronic services will always be taxed in the country where the customer belongs; it will not matter whether the customer is a business or an end consumer and it will not matter whether the supplier is in the EU or outside.
This apparently simple statement should require little further explanation but, unfortunately, we are dealing with VAT! The most recent European Commission publication on the subject, a series of explanatory notes issued on 3 April 2014, consists of 92 pages of highly detailed commentary. These cover virtually every eventuality imaginable, from how a UK business should deal with selling services to a Dutchman in a Hungarian internet café, to how Californian businesses should cater for sales of supplies using a decoder in Poland.
Having whetted your appetite, there is a further mechanism to consider in anticipation of the new rules. As the tax concerned will crystallise and need to be accounted for in the country where the customer belongs, it is clear that many businesses would have had to consider registering for VAT in up to 28 different jurisdictions.
A “Mini One Stop Shop” (“MOSS”) will be introduced to bypass such an administrative and compliance nightmare, which will enable pan-European VAT responsibilities of this kind to be accounted for through one return in a single Member State. It is understood that, if this MOSS proves to be a success, its scope may be widened to include other cross-border transactions, for example distance selling.
Never has Anthony Barber’s 1973 “VAT is a simple tax” quotation been called into question so much as now, and I fear that the changes from 1 January 2015 described above (which have a dual purpose of capturing the correct tax as efficiently and simply as possible) will not make things any easier.