Vendors can register for VAT in each EU state where they have customers, or register with the VAT Mini One Stop Shop (MOSS), but so far only 7,000 businesses across Europe have registered for MOSS, even though figures suggest that there are over 200,000 companies in the UK alone that would be eligible.
It is feared that the new rules which came in 01 January 2015, may have made selling in the EU less profitable for some businesses, while others may have put off selling to individuals in these markets altogether as a result.
VAT Consultant at Rouse, Nicola Gladwell commented, “It is worrying to hear that businesses are either failing to register for the MOSS service or avoiding making these EU sales. If you are in doubt I would urge you to contact our tax team to discuss your options and the potential impact on your business. It may be far easier to get help, than take on the additional admin and filing burden yourself.”
First MOSS submissions made
Unlike UK VAT Returns, MOSS Returns have fixed quarterly periods ending 31st March, 30th June, 30th September and 31st December. The submission of these returns and payment of any tax due must be made by the 20th of the following month.
The first MOSS Return period ran to 31st March 2015 and therefore the first submission and payment were due yesterday, 20th April 2015.
Non-compliance penalties could be significant
Whilst registration with the new MOSS system is optional, accounting for EU Vat is now not.
It you are selling in the EU and you choose not to register with MOSS then you will need to account for all your EU sales on a country-by-country basis – and that’s a lot of administration, not to mention understanding the detail on, potentially, 28 EU tax authorities.
To resolve disputes and/or pay any penalties or fines, you will be expected to deal directly with the tax authorities in the relevant member states which you make digital supplies (and make payments in their currency).
As an example, in Germany the penalty for late filing of a VAT Return can be up to 10% of the net VAT liability due for the VAT return period, up to €25,000. Failure to make a VAT payment on time may result in a late-payment penalty. The penalty is 1% of the outstanding VAT payment, multiplied by the number of months that the payment is overdue.
The penalties in all other member states varies according to their own policy.
How can we help?
If you would like more detailed information or guidance on the new EU VAT rules for digital services please do not hesitate to contact us. Our tax team can:
- Provide advice on whether your services fall into the new rules
- Assist you with the VAT registration and return completion process
- Consider the impact on your UK VAT accounting (including Flat Rate Schemes)
- Consider if you could change the way you do business in order to avoid the burden of MOSS (eg use of platforms/ digital portal providers)