Will new VAT on eServices rules affect your company? The landscape of the VAT world changes radically on January 1, 2015, when taxation reform kicks in.On this date the emphasis of VAT reverts back to being a tax on consumption. The VAT reform will affect all EU sales of telecommunications, broadcasting and electronic services. VAT will have to be applied based on where the end consumer is located. The existing rule is that VAT is applied based on where the supplier of the services is located. Here are some simple questions that businesses need to ask so as to understand if they affected by the new VAT rules.
Do consumers access the internet to avail of your service? The new EU VAT on eServices rule only affects a service supplied via the internet.
Do you have sales in the EU? Only sales in the EU come under the scope of the new rules.
Are your EU sales business-to-business (B2B) or business-toconsumer (B2C)? Only B2C sales are affected by the 2015 change to the EU VAT rules. The rules for B2B sales do not change.
Does your company’s internal systems have the capability to identify where your B2C consumers in the EU are located? You have to be able to identify the location of your end consumer. The new rules demand two pieces of non-conflicting evidence. If your systems only have the capability to collect two pieces of evidence (such as an IP address and billing address) what happens if they conflict?
If a billing address is in one country and the IP address in another then you will need another form of evidence (such as a consumer’s bank details or mobile phone SIM card code) to prove where your consumer is located.
Are you familiar with EU VAT rates? You will need to be. If you have B2C sales in numerous EU Member States then you will have to account for the varying VAT rates. The VAT to be charged is based on the location of your end consumer so you need to be familiar with EU VAT rates.
What about foreign exchange calculations? Remember, not all EU Member States are also members of the Eurozone. You will need to account for foreign exchange calculation on your payment page as well as VAT calculation.