If you are running a business and selling digital goods then you should be aware of the latest EU rules which came in to force on the 1st Jan 2015 and how they will affect the way in which you charge your customers VAT.
The new rules have come in to force to try and curb the tide of larger businesses paying less tax by setting up the company in a tax haven or low tax country. However, the impact on smaller business is yet to be fully comprehended.
A summary of the new rules –
On 1 January 2015 the VAT rules for cross-border B2C supplies of ‘digital services’ (i.e. broadcasting, telecoms and e-services) will change. From that date, VAT must be accounted for in the member state where the customer normally lives, rather than where the supplier of the service is established. – HMRC, Brief 46
As a supplier of digital services to EU consumers you must now do the following:
- Charge the correct country VAT rates based on customer’s location.
- Validate the customer’s location and ensure there are 2 pieces of non-conflicting evidence stored (e.g. a billing address and a matching IP Address) for 10 years.
- Report your VAT to each EU state, or use a MOSS (Mini-One-Stop-Shop) which reports to each EU state on your behalf.
What does this mean for your business??
Research by EU VAT Action has shown that 200 businesses they know of closed in the first week of the new EU VAT rules.
Online micro businesses which sell anything to EU customers must now register for VAT even if the company turnover is under the £81,000 threshold.
So if you are selling digital services in Europe then you need to take action, digital services includes:
- Broadcasting – the supply of radio or television programs
- Telecommunications – connection to the internet, fax, fixed and mobile telephony
- e-services – downloaded applications (or apps), music downloads, video on demand, gaming, e-books, anti-virus software and online auctions
Updating your E-commerce website
In order to comply with these new rules, you will need to make changes to your e-commerce website to accommodate them.
If you are running woocommerce on WordPress then there is now an invaluable plugin that has been developed to help with this issue and it is called Taxamo.
If you are using other CMS systems and/or E-commerce solutions then you will need to further explore the options for your specific system.
For information, help and guidance in updating and configuring your E-Commerce website to comply with the new rules – contact TR8 Media today and find out the cost of securing your business in 2015.
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