On 1st January 2015, EU VAT laws are changing. Electronic service or ‘e-service’ companies must follow certain rules to comply to the new law. According to taxamo, from 1st January 2015, electronic service companies must:
- Identify the location of their customers
- Apply the correct VAT rate
- Validate VAT numbers for B2B transactions
- Collect evidence to verify the location of the customer
- Store evidence for 10 years
- Create a quarterly EU MOSS return
- Issue e-invoices
- Be audit ready
What is an e-service?
According to Recurly a digital/electronic service is:
- A service (i.e. not goods)
- Delivered via the internet, or an electronic network
- Supply is automated or involves only minimal human intervention
- It is impossible to ensure in the absence of information technology.
Some examples of a digital service are:
- Downloadable and online games
- Downloadable and streaming music and videos
- Software provided as a service (e.g. Cloud Computing)
- Mobile phone services
- Streaming television (e.g. Netflix)
How can I prepare?
If your company is affected there’s a few changes you’ll have to make. Here we’ve gone through the major changes your business will face when preparing for the new laws.
Storing personal data
Your company will need to store personal data, e.g. addresses and phone numbers. This will mean that you’ll have to register under the Data Protection Act and comply with the requirements. Click here to see how to register your business.
HMRC have set up the VAT MOSS scheme (VAT Mini One Stop Shop), you can apply for this scheme if your are based in the UK (union VAT MOSS scheme) or if you are a non-EU business (non-union VAT MOSS scheme). The scheme means you can submit a single calendar quarterly return and VAT payment to HMRC, who will then send the information and pay the relevant member state’s tax. For more information on the VAT MOSS scheme click here. Or click here to register for the VAT MOSS scheme here.
The new VAT rules will affect the amount of VAT charged to the customer, therefore this will impact margins in the supply chain. Consequently, the business will need to set prices accordingly.
Taxamo, offer a ‘real-time’ software, which allows your business to comply with EU rules without affecting the customer journey. To find out how Taxamo works have a look at their website here.
Please note this blog is for information purposes only, if you are concerned about how this affects you, you should speak to your accountant to find out how it affects you.