15 August 2014
John Sheehan continues his series on the new rules for the Place of Supply for Digital Services and the introduction of Mini One-Stop Shops (MOSS) for VAT purposes.
Once the customer of has been identified as not being VAT registered, it’s necessary for the supplier to decide whether or not that customer is a consumer, rather than being, say, an unregistered business. The fail-safe position for a supplier is to treat the customer as a consumer, unless there’s good evidence on hand to the contrary.
After that hurdle has been overcome, the next one is deciding where the customer is located for VAT purposes. This is a very important step in the process as it governs to which fiscal authority VAT needs to be accounted for and, ultimately, paid. The nature of digital services means that they can be consumed on the move and it may be possible to supply one customer, who is an individual, in a number of locations.
In some cases identifying the whereabouts is easy and for natural persons the first assumption is that the location of the supply is to the person’s permanent or usual residential address. For legal persons, e.g. companies, precedence is given to the location of the central administration.
Where a supplier doesn’t have a customer’s address, the place of supply can be based on some information that may be available to the supplier such as:
- Where a customer is required to be present in order to consume a service, for instance at an internet café, a phone booth or a wi-fi hotspot, this location can indicate the place of supply.
- The location of a land-line over which services are received.
- The country of registration of a SIM card in a mobile phone.
- The place where a decoder is located or where the viewing card is sent.
In making a location decision, a supplier will need 2 or more pieces of non-contradictory evidence, which may include the billing address, the IP address, bank details, the SIM card code country, or landline location. A customer may dispute the location decision, but will need to supply 3 or more pieces of non-contradictory evidence.
All of this gives suppliers of digital services the need to find out somewhat more about their customers than they may have done previously, to put in place processes to capture this information routinely and to make location decisions based on this information in a structured way.
If you require any advice on the identification of consumers, please contact one of our tax advisers at your nearest location, or complete the contact form.