Vat Changes to the supply of TBE Services (On-line Goods & Services) from 1/1/2015
From the 1st January 2015, there will be changes in the VAT system for the supply of telecommunications, broadcasting and electronic "TBE" services (on-line goods and services).
Irish residents buying books, music downloads, clothes, a pair of shoes or anything else that can be bought from an on-line vendor in Europe will pay VAT in Ireland at Irish tax rates. This is a change from the current system whereby a customer paid VAT at the rate of the EU country in which the seller is based.
E-Commerce has been growing in recent years and the aim of this change is to attempt to harmonise vat rates in the EU as the politicians cannot agree on a standard vat rate across Europe.
In a nut shell, from the 1st January 2015, the place of supply in respect of all supplies of telecommunications, broadcasting and e-services to customers will be the place where the customer resides. This means that the VAT on such supplies will be chargeable at the vat rate applicable in the EU member state where the customer resides and the supplier will have to account for the vat in the member state of the customer.
This is a change from what has gone before for businesses who supply or sell ‘business to consumer’ (B2C) services because the vat rate will be the vat rate of the country where the customer resides and the business may have additional record keeping and may have to look at its billing, accounting and IT systems as a result.
Mini One Stop Shop (MOSS)
To simplify obligations for businesses, a special scheme known as the Mini One Stop Shop (MOSS) will come into operation on the 1st January 2015. MOSS will allow businesses, through the web portal of the country it is based, to submit Vat returns and pay the relevant Vat due to the member states where its customers are based. Although the use of MOSS is optional, the alternative is that the business will be required to register and submit vat returns in several EU countries i.e. any country in Europe where one of your customers is based.
How will MOSS work?
* MOSS is the alternative to registering for vat in each EU country you do business in or you have customers in. * A business will register for MOSS in the EU country where it is based i.e. an Irish Supplier based in Ireland will register with the Revenue’s Vat MOSS system. * Irish businesses may submit their registration details on-line through ROS. * Once registered, the business would make a quarterly vat payment which will then be processed by MOSS and distributed to the relevant EU country.
Where will Place of Tax of a business will be?
For most services sold on-line, it will be obvious where the customer resides. When you make a sale to a customer in another EU country, you must make a decision about the place where that customer resides.
Businesses will be required to keep records of the information used to determine the place of tax of the customer they are selling to. Your business must maintain two pieces of non-contradictory and commercially relevant evidence to support the place of residence of your customer, such as customer billing address, customer bank details, customer credit card details, Customer IP address, Customer Mobile (Sim Card) Number etc.
Can a Business in Ireland whose turnover is below the VAT registration threshold use MOSS?
The VAT registration thresholds that apply to small business in Ireland do not apply to businesses that are not established in the Member State where your customer is. Businesses whose turnover is below the threshold and therefore not required to register for Vat in Ireland but do supply telecommunications, broadcasting or e-services to consumers in other Member States are still obliged to register and account for VAT in those Member States or, alternatively, register for the Mini One Stop Shop (MOSS) in Ireland. Such businesses can register for MOSS without any obligation to register for VAT in Ireland. When completing the MOSS registration process, the Corporation Tax Number or PPS Number (as appropriate) of your business should be provided as an alternative to a VAT number.
Can a Vat Group register for MOSS?
Yes, a VAT Group can register for MOSS. Any member of an existing VAT group can apply to register for MOSS and the Group member who completes/submits the Vat returns does not have to register for MOSS.
Remember from the 1st January 2015, if your business supplies telecommunication, broadcasting and/or e-services to consumers, your business is obliged to register for Vat in each member state where your customers are based. The Mini One Stop Shop (MOSS) is an optional scheme designed to simplify matters, which will allow your business to submit a single return and payment each quarter for all states in which your customers are based.
If you have any questions or queries on how it affects your business, you can contact me.
Timothy Kelliher Chartered Accountant