In November 2017, the Council of the European Union passed a number of changes to EU VAT law that will predominately affect supplies in the ‘online’ market place. The changes proposed will come into effect in two phases the first being 1 January 2019 and the second being 1 January 2021. The Councils stated purpose of these changes is to make it easier for online businesses to comply with VAT rules and to reduce the compliance burden on small to medium sized enterprises. In this article we look at the changes passed for 2019 impacting the Telecommunication, Broadcasting and Electronic services (“TBE”) industries. In the next edition of Indirect Tax matters we will cover the changes coming into effect in 2021 so watch this space.

New simplification measure to place of supply rules for TBE services

Currently, the place of supply of Business to Consumer (“B2C”) supplies of TBE services is the place where the consumer (non-taxable customer) resides and companies must pay VAT in these countries through the Mini One Stop Shop (“MOSS”) online portal in their country of identification thus avoiding multiple VAT registrations across the Member States where their customers are located.

Under the new rules, a taxable person or business whose total turnover from supplying TBE services to other Member States does not exceed a threshold of €10,000 can opt to apply the taxation rules of their own Member State. This will mean that the place of supply of services for VAT purposes for these services providers will be the country of establishment of the supplier. In these circumstances there will be no requirement to file via MOSS and local country VAT rates will apply to these sales.

The aggregate VAT exclusive annual value of TBE services to all EU countries must not exceed €10,000 in the current or preceding calendar years, to avail of this relief. However it is not mandatory that business avail of this simplification measure and they can opt to have the place of supply in the customer’s country of residence and pay local VAT through MOSS in their country of identification. Suppliers might do this if the VAT rate in their own Member State is high.

Administration Changes to the MOSS Scheme

In order to assist the operation of the MOSS scheme for start-ups and SMEs the Council of the European Union have implemented a number of new measures which will reduce the filing burden for business with MOSS filing obligations.

Invoicing Rules

The invoicing rules of the country where the supply is deemed to take place will no longer apply. Instead, the supplier must follow the invoicing requirements of the Member State where the supplier is identified for MOSS purposes. For example a company supplying TBE services to Germany who is identified for MOSS purposes in Ireland will be required to follow the VAT invoicing rules in Ireland instead of the invoicing rules in Germany.

Customer Identification Requirements

A supplier of TBE services must, under current rules, ascertain the location of its customers and retain two pieces of evidence in order to confirm the location of their customers.

However, the new rules coming into effect in 2019 will require suppliers with cross-border TBE sales under €100,000 per year to retain only one piece of evidence for the location of their customers, i.e. the country of taxation. Examples of evidence that TBE suppliers may retain include the billing address of the customer, IP address of the device used, the location of the bank used for payment etc.

Non-EU Established Suppliers

Currently, taxable persons not established in the EU but having a VAT registration in a Member State (for example because they carry out occasional transactions subject to VAT in that Member State), cannot use the special scheme for taxable person not established in the EU (non-Union MOSS scheme), nor the special scheme for taxable persons established in the EU. Therefore they are currently required to have multiple VAT registrations across the EU.

The non-Union MOSS scheme applies to any person not established within the EU supplying TBE services to a non-taxable person who is established in a Member State or has his permanent address or usually resides in a Member State

The new rules will allow taxable persons not established within the EU but who are already identified for VAT purposes in the EU to make use of the non-Union MOSS scheme and they can choose which country they wish to register in for MOSS purposes.