19 September 2014
In the final article in the series, John Sheehan looks at how the Mini One-Stop Shop (MOSS) is to be policed.
Like all self-assessing tax facilities, as the fiscal authorities have no direct control over the assessment process, they reserve for themselves the right to check the returns that have been made. There has been a reasonable level of consultation about the whole MOSS process and the audit and compliance aspect is no different, with business representatives being involved, as well as the relevant authorities. This has led to a somewhat less bureaucratic approach than otherwise might have been the case.
It is intended that there will be a single point of contact in each EU state acting as a member state of identification (MSI), ie the state where the MOSS-using digital services supplier is registered. Authorities in a state to which a MOSS return has been made, a member state of consumption (MSC), can raise queries about a return to this contact point. The MSI’s MOSS co-ordinator will then ask if any other MSC’s require information in respect of the MOSS return and then proceed to arrange checks on the supplier’s records, as required. The results of the checks are then sent to the relevant MSCs for decisions.
This approach has the advantage of:
- using existing practices and protocols,
- avoids language difficulties,
- allows for consistency in approach,
- promotes co-ordination,
- lessens data security and identity fraud problems, and
- reduces the overall burden on businesses.
Imagine making a return that could be scrutinised and investigated by the German, French and Slovenian authorities, with each authority undertaking questioning in its native language and each querying different aspects of the return and the underlying processes. Much better to receive a contact from the friendly local VATman asking all the questions in English and, if necessary, making a visit to explain what’s gone on face to face!
To add to this sensible approach, it has been indicated that during the initial period of implementation the enforcement regime will be light touch, as suppliers and the authorities get to grips with the new procedures.
So much for the good news. The less good news is that relevant records need to be kept for ten years and that, should errors be discovered, the applicable penalty regime will be that of the MSC, so traders may be subject to a wide range of penalties. As yet, penalty regimes are not published centrally, so exposure to penalties needs to be researched on a country by country basis. Additionally, suppliers can be removed from the MOSS system, which, if business is to be continued, will require separate registration in each country to which supplies are made, dependent on registration thresholds. Since most Member States have a zero registration threshold for non-resident suppliers, this administrative nightmare may act as more of a deterrent than the penalties!
If you would like to find out more about how the new supply of digital services rules and Mini One-Stop Shops will affect your business, contact one of our tax advisers at your nearest location, or complete the contact form.