One Market - 28 different VAT Rate Zones
(Plus New Quarterly Returns, 10 Years of Records, 2 Forms of Proof, New Software)
28 Nov 2014
... designed to make the operation of the tax as simple as possible and, in particular, to ensure that it is not disruptive or onerous for suppliers of digital services. -- EU FAQ (ref)
If you sell certain electronic services (examples, See Note 1), such as digital downloads and eBooks, new EU VAT rules (in the UK, called VAT MOSS - Mini One Stop Shop) come into affect on 1 Jan 2015. For a sole trader, the new rules will be so disruptive and onerous, that many will go out of business.
Before: If you are under the £81K VAT threshold, you do nothing! You do not charge VAT. Easy!
After: No threshold. Even though you are under the £81K VAT threshold, any sales you make to people in the EU (except the UK), will be subject to VAT at their local rate. There is no threshold.
You also need to provide a VAT invoice, and if asked, provide two pieces of non-conflicting evidence to support your tax assessment and prove the place of supply (see note 2), keep these records for 10 years, and provide quarterly reports to HMRC..
You must now apply the local standard VAT rate in all 28 EU countries where your digital content is sold, taking into account any geographical anomalies and exceptions (there's only a couple of dozen).
You must register with HMRC who will manage your EU VAT MOSS obligations (website). You must now submit a VAT declaration electronically each calendar quarter, detailing how many sales were made to each of the 28 EU countries, how much, the amount of VAT charged, and then make payment in GB Pounds.
If you use a shopping cart, you need to find one that charges VAT at the point of purchase, and is able to itemise all purchases by country and individual VAT rate. Shopping carts that may help are listed below.
If you use an "open source" (free) shopping cart, the chances that you will get an update to do this, are slim (but see Drupal Commerce below). Your option is to buy a commercial shopping cart (if one was available). If it does become available, you will need to:
If you don't use a shopping cart, but you use NoChex or Paypal payment buttons, then things may be little easier.
Paypal lets you create International Sales Tax rates for individual countries. Details here.
Alternatively, where you had one payment button for each product, you now just have to create a dozen or so for each product, representing each of the different VAT rates you will encounter in the EU. For example:
Shopping cart software supporting VAT MOSS
Note 1. Illustrative list of Electronic Services (Ref: Council Directive 002/38/EC, Annex I)
Where the supplier of a service and his customer communicates via electronic mail, this shall not of itself mean that the service performed is an electronic service within the meaning of the last indent of Article 9(2)(e).’
Note 2. HMRC suggest that "you’ll be expected to obtain and to keep in your records 2 pieces of non-contradictory evidence from the following list to support your taxing decisions. Examples include:
End quote. Comments: