New EU VAT rules will have seismic effect
New EU VAT rules will have a seismic impact on how eCommerce works.
Affected businesses will have to adapt so as to meet the internal demands and external requirements of the VAT legislation reform.
Compliance with the new EU VAT rules is now key.
How will an eMerchant comply with the new rules?
The new EU VAT rules change the emphasis of eCommerce taxation. From January 1, 2015 (the launch date of the new legislation), all merchants providing broadcasting, telecommunications and electronic services in the EU will have to ensure that their business complies.
The new rules only apply to B2C sales of these services.
Accepted pieces of evidence for these digital service sales include:
- Billing address of the end consumer (will be used to validate credit card)
- The end consumer's landline (if the service was supplied via this source)
- IP address (will identify the location of the consumer when they used a service)
- Mobile phone SIM card country code (will, again, identify where the consumer is located)
- Bank details
- Other commercially relevant information
The burden of proof is on the merchant, it is their responsibility to prove that they charged the current VAT rate based on where their end consumer is located.
Registration with the mini one stop shop
As part of the path to compliance with the new EU VAT rules a system called MOSS (mini one stop shop) has been created.
MOSS has been created to ease the compliance process. An EU eMerchant can register with the MOSS in their own country. This country will be the MSI (member state of identification). The merchant register all the VAT collected from their EU sales with their MSI. The MSI will, in turn, distribute the relevant VAT to the EU member states where the VAT is due. These member states will be the MSC (member state of consumption).
A non-EU eMerchant with no permanent base in the EU has the option of selecting an MSI from the 28 EU member states. Once selected the compliance process is the same as for EU eMerchants.
Aim is to make the digital economy pay fair'
Last October 2013, Algirdas Semeta - the EU Taxation Commissioner - said the main reason behind the new EU VAT rules was to compel the digital economy to play fair and pay fair'. Compliance is all that matters now as the EU will work to enforce the rules from January 2015 onwards.