MOSS all around the world & it's all okay, a third party handles your digital sales
It is all okay, a third party handles your digital sales so no need to register for VAT.
Well... yes and no.
No worries if they:
· Handle payments
· Handle supply to customer
· Set up standard Terms and Conditions
But, there is always a 'but', not all third party platforms are ready to comply with the new VAT legislation. Check with your third party platform to make sure you are legally selling your "automated digital services"
Yes - you do need to worry if:
· Your 'third party' is not set up to be compliant - check with them
· You use PayPal - PayPal and similar payment providers are not third party providers.
Sales covered by the new VAT rules are:
· Business to Customer (B2C) - private consumer, non-business customer.
· Business to Business (B2B) - treatment of VAT stays as it is at present.
Mixture of countries
If your sales are a mixture of UK and EU sales and you are below the UK VAT threshold you will have to register for VAT in the UK. It is advisable to register for UK VAT and join the Mini One Stop Shop (MOSS) scheme;
· This will NOT mean you have to charge VAT on UK sales, or be able to claim VAT on any UK sales - after registering, your UK sales will need to be accounted for separately to EU sales.
· You will, however, be able to claim VAT on any expenses incurred solely and wholly on any EU sales
· Using MOSS means four returns a year
· Not registering in UK means you will need to register in the EU state your customer is located in - easier to use the MOSS scheme
UK only sales
· If under UK VAT threshold: 1) do not register or 2) voluntarily register if you want to.
· Do not worry about MOSS scheme
Outside of UK & EU sales
· The current scheme does not affect supplies to non-EU customers (business or otherwise), under existing rules reverse charging applies and the UK supplier does not charge VAT.
· Electronic services are within the list of services where the place of supply depends on where the customer is based if the customer is resident outside the EU.
· It should be noted that some countries outside the EU are likely to introduce similar schemes. South Africa has introduced a variant of the MOSS scheme and the USA are currently looking at it.
Be aware that by not complying with the new VAT rules - see previous blog: "VAT is not for me - you think not? Beware - new rules on digital sales" - could cause a financial problem for a SME. If an eMerchant does not comply then it will be penalised based on which EU member state’s tax law has been broken.
Penalties vary country to country it could be twice the amount of VAT unpaid without any upper capping limit, as in Denmark and Belgium; in Spain it is 50% of the VAT. Other EU member states have upper limit monetary fines for example; Slovenia €125,000, in Germany it could be up to €50,000.
If your business has digital sales in the EU you will need to:
· Locate your customer in the EU, using to non-conflicting pieces of evidence
· Have systems in place to calculate the VAT rate of the country in which the sale takes place. (Sales take place in the country the customer is based in) Negate this requirement by signing up to Mini One Stop Shop via HMRC, online completion of return will automatically calculate relevant country's VAT due.
· Correctly invoice for EU sales
· Store transaction data for ten years.
MOSS to spread around the world?
It appears that at a UK seminar held in June 2014, and from an European Commission’s report on the taxation of the digital economy, published May 2014, the Commission considers these changes mark the first step towards all goods and services supplied to consumers will be subject to VAT in the customer’s location.
To handle the changes MOSS will need to be extended. Agreements with other countries outside of the EU are being looked at by the Commission re the possibility of extending MOSS to cover these countries - Canada and South Africa have been mentioned. Indications are that all VAT charges should be extended and for them to be based on the place where the consumer is located.
For more information on this subject please contact Cecile Hunt.
Tel: 01594 842164 Mob: 07963 892 439 Email: email@example.com
Cecile is licensed to practice in accountancy and has run her own business for ten years, she has a wealth of experience in advising and assisting start-ups, micro and small businesses in running their business' plus advising on, and dealing with, taxation issues, including VAT, of sole-traders, limited companies, partnerships and personal tax.
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