The EU have released draft changes to the VAT Directive which simplify VAT for micro businesses, introduce Mini One Stop Shops for distance sales, and bring further changes for online market places.
Following the EU’s Review of VAT and its published comments on simplification, it has now issued significant draft changes to the European Council 2006 VAT Directive, which is the overriding VAT law for EU Member States.
It is considered likely that these changes will also be transposed into UK VAT law, despite Brexit.
Intra-EU place of supply of services
The Place of Supply of services to a consumer (B2C services) changed in January 2015 to where the customer belongs for the following services:
- Telecommunication services
- Radio and TV broadcasting services
- Electronically supplied services.
These rules will be releaxed, from 1 January 2019, to assist smaller businesses. Where the supplier has a fixed or business establishment in only one EU country:
- The place of supply will revert back to where the supplier belongs if the following conditions are met:
- The consumer resides in a different member state to the supplier, and
- The total value of supplies to those consumers residing in other Member States is less than €10,000 in the current and previous calendar year.
- If the €10,000 threshold is crossed during the calendar year, the place of supply rules will change from that date onwards and for the following calendar year.
- Businesses can opt to apply the January 2015 place of supply rules and ignore the €10,000 threshold.
VAT invoicing
From 1 January 2019:
- What constitutes a valid VAT invoice, will be determined based on where the Place of Supply of goods or services is deemed to be. The exceptions, where the invoicing rules will be based on the country of the supplier include:
- Reverse charge supplies of services
- Non-EU place of supplies
- Supplies covered by the current Mini One Stop Shop (MOSS) return.
VAT MOSS
From 1 January 2021:
- The current VAT MOSS returns will be extended to cover the following:
- Any non-EU business supplying any services to consumers in an EU Member State.
- Intra-EU distance sales of goods.
- Distance sales of goods imported from outside the EU Member States, where the value of the goods is no more than €150.
- The frequency of VAT MOSS returns depends on the type of supply
- For services and intra-EU distance selling of goods, calendar quarter returns are required, whether or not any relevant supplies were made in that quarter.
- For distance sales of goods imported from outside the EU Member States, monthly returns are required, whether or not relevant supplies took place.
- The Time of supply for distance sales of goods imported from outside the EU will be the date payment is accepted.
- The deadline for VAT MOSS returns will be extended from 20 days, to the end of the month following the end of the tax period (i.e. the same as normal VAT returns).
- Errors on VAT MOSS returns will be corrected in a subsequent return, but must be made within 3 years of the deadline date of the initial return.
Distance sales
The EU are not satisfied that changes brought in by some EU countries (such as UK), which made Online Marketplaces jointly and severally liable for VAT has been sufficiently effective.
Therefore, with effect from 1 January 2021, further changes are made where online market places (or similar platforms) are used to make distance sales of goods.
Distance sales are sales from a business to a consumer (B2C) resident in an EU Member State. If distance sales exceed a particular Member State distance selling threshold, the supplier must register for VAT in that country.
- If distance sales goods are imported from outside the EU and the value does not exceed €150, the online market place will be treated as receiving the supply and making the supply itself. This will make it liable for the VAT:
- The value limit has been set at up to €150 as above this, full customs declarations are required, making it possible to hold the supplier accountable.
- If the goods are subject to excise duty, they will not be subject to the new rules and import VAT will not apply on the goods caught, to avoid double taxation.
- The online market place will also be treated as receiving and supplying goods which are EU distance sales (B2C) from a non-EU supplier. There is no value limit for this.
- The online market place must maintain adequate records for 10 years.
- The place of supply of distance sales will be where the transport to the customer ends in the following cases:
- They are intra-Community distance sales (i.e. one EU Member State business to a consumer in another EU Member State).
- They are imported from outside the EU into one EU Member State but are transported to another EU Member State.
- They are imported from outside the EU into an EU Member State and the goods are reportable on a VAT MOSS return.
- This does not apply to supplies covered by the Second Hand Goods scheme.
Links
Place of supply: Mini One Stop Shop (MOSS)
Place of supply: Mini One Stop Shop (MOSS) (freeview)
Reverse charge & place of supply
Online Marketplaces: joint and several liability
External link:
The draft legislation can be found here.
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