Munster’s first independent VAT consultancy practice providing specialist VAT and Indirect tax advisory, assurance and interim management support services to owner managed businesses, small & medium enterprises, accountants and legal practices.

Place of supply for telecommunications, broadcasting and electronically supplied services: The final phase!

Wednesday, February 26, 2014

by Nick Ryan

With effect from 1 January 2015 the final piece of the VAT Package jigsaw will fall into place, the picture will be complete though a little blurred in parts and some pieces straining to fit with one another.
From the 1 January 2015 the place of supply for these services to consumers will shift from where the supplier is established to where the customer is located. To accompany this change will be the introduction of the Mini One Stop Shop aka MOSS. Moss is the EU Commissions’ accounting carrot that will look to simplify the VAT reporting and compliance requirements for businesses in managing this change. It is optional and a business can elect to register for VAT in each of the EU Member State in which customers reside and who receive services from them. Unlike distance sales, there is no VAT registration threshold to consider and a local VAT registration is required irrespective of the level of sales made in each EU Member State.
For distance sellers the ongoing pain of multi-jurisdictional VAT registrations will continue while for telecoms, broadcasting and electronic services suppliers there will be the simplified VAT registration option whereby the business can manage the supplies of these services under one VAT registration which will identify, report and account for VAT for services to customers in the EU under one quarterly VAT return. The EU Member State where the business is registered for VAT under MOSS will then distribute the VAT due to the respective EU Member States where services have been provided. It should be noted though that this system does not encompass the offsetting of VAT incurred by the business on taxable operating costs; the business will need to seek refunds for these under the EU VAT refund system.
Sounds straightforward? With all things VAT there comes a catch or three and the management of VAT in conjunction with the risk of error have to be met. A telecoms/broadcaster/electronic service provider will need, either if they already do business in the EU or, are looking to enter the market, to establish a number of points over the next six to eight months:
• Will they need to register for VAT in the EU, if so, which EU Member State suits?
• Which EU Member States is its customers residing in.
• How do I verify my customer’s status?
• What determines the place of supply for my services i.e. telephone kiosk/internet cafe and, what if I provide my service on board transport?
• How can I identify the customers EU Member State easily – what processes do I put in place to manage this?
• What are the VAT rates applicable for each EU Member State for the services I provide?
• How do these VAT rates impact on my margin/cost base?
• What if I also provide services to businesses?
• How do I manage VAT reclaims for business/operating costs?
These are some of the questions that a business will need to clarify and resolve in advance of 1 January 2015 and for which we can assist them with. A business will need to implement any changes to its accounting, IT and other sales reporting systems in order to capture the information required and ensure VAT is accounted for correctly. These measures will need to be taken well in advance of 1 January 2015 in order to be ready and we would recommend that any business should weigh up the pros and cons for it in either opting for MOSS or taking the multi-jurisdictional route for registration. Businesses servicing B2B and B2C customers will need to ensure they can clearly separate the services and report VAT correctly.
For some businesses MOSS might not be practical and they will be required to put in place multi-jurisdictional VAT registrations and the administrative nightmare this can provide for, not forgetting both the reporting requirement variances and associated set up costs.
MOSS does indeed provide for a simplification in the accounting and reporting of VAT and is very welcome. Like all simplified procedures there is a catch in that there will be an increased cost for a business in administering the VAT though anything that prevents the requirement for multi jurisdictional VAT registrations should be welcomed.
Distance sellers will be both frustrated and disappointed that the scheme was not considered for their purposes. Considering the variances of requirements for registration that distance sellers face together with the additional financial costs to them in merely arranging a VAT registration let alone the language, processing and management variances, MOSS would be a welcome facility.
Time does not stop and businesses within this sector will need to start the assessment process now in order to be sure to be ready by 1 January 2015. For further information on MOSS, the place of supply rules for services or, for assistance in assessing your business in readiness for the introduction of this change then please contact Nick Ryan on advice@thevatpractice.ie or +353 238838181.

Tags: MOSS, pLACE OF SUPPLY OF SERVICES RULES, Revenue VAT news, vat and distance selling, vat and e-sellers, VAT and electronic services, VAT AND TELECOMS, VAT blog, VAT News, VAT SERVICES