Who Will Be Affected By EU VAT Digital Services Legislation? The EU VAT digital services reform kicks in at the start of 2015 and yet there is still a lack of knowledge as to who will be affected and how. The rule change due to be implemented on January 1, 2015, relates to digital service merchants with B2C sales in the EU. It only affects B2C sales from EU and non-EU merchants. What is a digital service? In legislation the EU narrow the definition of a digital service to: • •
A service (i.e. not a physical good) Electronically supplied (via the internet)
If a merchant has a service that is supplied via the internet then more than likely it will come under the scope of the new EU VAT digital services legislation.
Example of digital services? The most common types of digital services are the downloads of images, music and films; the installation of anti-virus software, etc. Other types of digital services include: • • • • •
Website hosting E-books Online magazine/newspaper subscriptions Download of games to PCs and mobile phones
There are also some services that are not affected by the new rules, they include: • • • •
Supply of services of accountants and lawyers who contact their clients via email Interactive online teaching services via remote link Telephone helpdesk services Access to the internet and world wide web
What most affected merchants do? If a merchant’s business is impacted upon by the new EU VAT digital services legislation then they must declare the VAT due on the sales in EU member states. To do this the merchant can either declare VAT with each individual member state or, alternatively, then can register with the new mini One-Stop Shop (MOSS) system. MOSS enables a merchant to make one declaration per quarter including all their EU VAT. A merchant must select an EU member state with whom to register with (via a web portal). The selected member state will then distribute the relevant VAT to the member states where the sales took place. The EU have declared that the MOSS system will ease the administrative burden for merchants as they will not have to declare with each individual member state to declare EU VAT.