EU VAT Compliance Is Driver Behind New 2015 Rules THE key driver behind the new EU VAT rules - which come into effect on January 1, 2015 - is EU VAT compliance.The rules have been reshaped to allow EU member states regain control of lost revenue. The success of the digital economy and its borderless state has meant that many companies have found loopholes so as to reduce their VAT bill. The EU has looked on for the past decade and a half as revenue generated in the EU was lost in what is termed the ‘VAT Gap’. This is the VAT that went uncollected for various reasons, such as poor book-keeping, ignorance of rules, non-compliance and fraud. The new EU VAT rules change the emphasis of taxation. Up until December 31, 2014, VAT will be applied to all B2C digital sales in the EU based on where the supplier is located. On January 1, 2015, VAT will be applied on all B2C digital sales in the EU based on where the end consumer is located. This rule change returns VAT to a tax on consumption.
The rule change only affects B2C sales of broadcasting, telecommunications, and electronic services in the EU. It will be the responsibility of all eMerchants with sales in the European Union to determine where their end consumers are located. The burden of proof is on the eMerchant and the new rules clearly state what type of information is required to prove the location of the end consumer. All eMerchants must produce two non-conflicting pieces of evidence so as to prove the location of their end consumer and, in return, the correct VAT rate to apply to a sale.
Accepted pieces of evidence include: • • • • •
Consumer’s billing address Bank account details Fixed landline IP address Mobile phone SIM card code
It is the responsibility of the eMerchant to prove where their end consumer is. It is important to note that the new rules allow EU member states to audit the VAT declarations of an eMerchant in another member state. The precise terms of the audit system have yet to be agreed upon but eMerchants need to be aware of the fact that their information can - and will - be checked and double-checked. In UK there are many online companies available who guide you regarding VAT matters like Taxamo, Where emerchants are enabling EU VAT compliance.