The EU VAT Mini One Stop Shop or VAT MOSS is the system for the collection and transmitting of VAT for telecommunications, broadcasting and electronic services (TBE services) supplied to final consumers across the 28 EU countries.
The European Commission has recently released statistics concerning the tax revenue generated on such services to consumers within the EU. It shows that VAT on cross-border trade to EU consumers in a variety of TBE services has increased steadily in the EU since a change in rules in 2015. Last year over €4.5bn was generated for member states under the scheme. It also shows that competition in this market is relatively healthy with more organisations registering to account for VAT using this service.
Since 1 January 2015, an EU business providing TBE services to an EU consumer in another member state has had to charge VAT by reference to the location of the consumer and not by reference to the location of the supplier. This has meant that instead of charging VAT at the relevant local rate, affected organisations have had to charge VAT (and pay it) wherever the consumer is located.
To help organisations comply with these rules, the EU extended a regime (referred to as the Mini One Stop Shop or MOSS) that already existed for non-EU businesses who were required to account for VAT in a similar manner.
The European Commission's new figures show in its first year MOSS generated tax receipts of €3bn in its first year, rising by 50 per cent over the course of the next three years of operation to generate €4.5bn in 2018.
Perhaps most surprising is the 20 per cent increase in tax take in 2018 over the previous year. RSM estimates that this means that the UK exchequer earned €675m [or 15 per cent of the total] from this regime in 2018.
There are two key takeaways from these latest figures. First, the complexity of the VAT rules for technology companies that serve consumers internationally can often involve VAT regimes in many different countries.
Second, UK businesses that have no establishment in the EU and that currently sell affected services to EU consumers must prepare for Brexit by quickly switching to the scheme required by non-EU members to avoid falling foul of the EU’s VAT rules.
In making these preparations, it is important to realise that some of the rules which apply to the scheme are different for non-EU businesses. In particular, a threshold of £8,818 must be exceeded before the scheme for EU organisations is obligatory. By contrast, no such threshold exists for the non-EU scheme. Furthermore, non-VAT registered businesses in the UK are not currently obliged to register under the MOSS scheme. Thus, many UK businesses may be required to register for non-EU MOSS after the UK leaves the EU and account for EU VAT for the first time.
To help identify and manage these issues RSM is arranging a webinar on 16 October with leading VAT professionals in the UK, the US and around the world who will discuss some of the issues and provide practical guidance to ensure businesses remain compliant - stay tuned for more information on this in due course.