Six Steps Ahead Of B2C 2015 EU VAT Change On January 1, 2015, the rules regarding the application of VAT to B2C digital services in the EU change. The new legislation is a game-changer for the ecommerce industry: it flips the world of VAT on its head. The key change is that the location of the customers, not the supplier, is all that matters for VAT purposes. Change is never welcome, especially when it comes to business regulation. So, how should digital services merchants deal with this change. 1. Am I actually a digital services merchant? The digital services affected are listed in the EU VAT Directive. Most services that require access to the internet are included. If you supply a service that is electronically-supplied via the internet then the new rules relate to your business. 2. Are my sales B2C or B2B? Only B2C sales of digital services are affected by the new rule change.
3. Are my sales in the EU? Only sales in the EU are affected.
4. How do I prove my consumer is in the EU? There are steps outlined in the VAT Directive about how the merchant identifies the location of their end consumer. Legislation requires two non-conflicting pieces of evidence to be produced by the merchant. Examples of evidence required include: the billing address of the consumer; their IP address; their mobile phone SIM card country code, and their bank details.
5. What VAT rate should I charge? The VAT is based on the location of your end consumer. This is the key change incorporated into the B2C 2015 EU VAT changes. You will obviously need to familiarise yourself with the VAT rates of the 28 EU member states.
6. How do I declare this VAT? You have two options. You can register for VAT in all of the EU countries in which you have B2C sales or, alternatively, you can register with the Mini One Stop Shop (MOSS) system. MOSS allows a merchant to declare all their EU VAT in one return. The merchant can registers with one tax authority, typically the tax authority where they are located, which will then distribute VAT based on the merchant’s sales in the EU.