12 September 2014
John Sheehan continues his series with the penultimate blog on the new rules for the Place of Supply for Digital Services and the introduction of Mini One-Stop Shops (MOSS) for VAT purposes.
From 1 January 2015 businesses that supply digital services to consumers (B2C) across Europe will be able to avoid the distance-selling rules and the administrative difficulty of having to register and make returns in every country where their customers belong. Instead they will be able to use the new MOSS portal, making returns and payments of VAT on-line to the relevant jurisdictions, aka Members States of Consumption (MSOCs) from their home base, termed the Member State of Identification (MSID).
Across the EU portals will be open from 1 October 2014 to enable the registration process to take place ahead of going live next year. For new registrants from 2015 onwards, registration will be from the first day of a VAT quarter. Whilst the number of businesses that will register is not known, there is already a form of MOSS in use for suppliers not resident in the EU and there are around 1,000 users of the existing portal, over half of which use the UK as their MSID.
To use MOSS, a business must be VAT registered in the MSID, which is usually where the business is established. The MOSS cannot be used in respect of a member state where the business has a permanent establishment. Accordingly, in the MSID and in any other states where there is an establishment, local VAT returns will still need to be prepared. Use of MOSS is optional, but frequently opting in and opting out again will not be permitted. MOSS use will cease when relevant activities cease, when a business no longer meets the conditions for use, or if there is persistent non-compliance with the regulations. It should be noted that only the MSID can cancel a business’s registration, not one of the MSOCs.
The MOSS return will be in standardised format and will only deal with tax on outputs, excluding exempt supplies. Any input tax will need to be dealt with on the local VAT return of the business. The returns will cater for multiple VAT rates across multiple countries and will be denominated in either Euros or the local currency of the MSID, so in the UK there will be Sterling MOSS returns! Corrections can be made to returns within 3 years via the portal. Payment to the MSOCs is carried out via the portal and, until 2019, the MSID will retain a percentage of the balance transferred. There is a list of standard records that need to be kept and these need to be retained for 10 years. MSOCs are responsible for the audit of returns made to them, but more of that next time.
If you require any advice on MOSS, please contact one of our tax advisers at your your nearest location, or complete the contact form.