19th December 2014
Big changes to VAT ‘place of supply’ rules in the European Union will mean clients need to be prepared for added complexity in their tax affairs.
In effect, from January 1st 2015 businesses supplying digital services will need to pay VAT in the country where the customer is. Telecommunications, broadcasting and electronic services will always be taxed in the country where the customer belongs, whether they are a business or consumer, and regardless of whether the supplier is based in the EU or outside.
It will hit all companies that sell digital products such as software, games, e-books, online movies, newspapers, music, television, telephone or internet banking services, says Raluca Tudor, senior consultant at MGI’s Romanian member firm, Teaha.
She explains how in order to comply with the regulations, companies will need to register for the ‘mini One Stop Shop’, which from January 1st 2015 will be extended to telecommunications and broadcasting and made available to EU businesses.
This scheme will allow firms to supply services to non-taxable persons and account for the VAT through a one-off registration in the country where the supplier of the services is based.
“This solution is optional and it represents a simplification measure that permits the taxable persons to avoid the registration in each and every member state of consumption,” advises Raluca.
She explains further: “In practice, a taxable person who is registered at the one-time registration counter of the member state of their identification (by their own VAT code) shall file quarterly electronic VAT returns containing details on the services they have electronically supplied to non-taxable persons from other member states, complete with the VAT due.”
Statements need to be forwarded to the member states of consumption, together with the paid VAT amount, by a secured communication network. Meanwhile, Raluca notes that before December 31st 2018, the member state of identification shall withdraw between 15-30 per cent from the total amount of VAT collected.
To speak with Raluca and the rest of the Teaha team, head to their MGI World member profile page.