On 1 December 2016 the European Commission released its proposals for changes in the way VAT is applied to cross-border online sales within and into the EU.
The current situation
Since 1 January 2015 any business (whether VAT registered or not) supplying telecommunications, broadcasting and digital services (such as apps) to consumers (ie non-businesses) in another EU country has been required to charge that country’s VAT rate and either VAT register in that country or make use of a Mini One Stop Shop portal (MOSS), whereby returns of these sales are made to HMRC in the UK for them to pass on to the relevant countries.
For cross-border sales of other services to EU consumers the general rule has been that the sales are treated as having taken place in the UK and therefore UK VAT is charged.
Up to certain annual limits per country (€35K or €100K) sales of goods to EU consumers have also been subject to UK VAT, however once those limits are breached, suppliers must VAT register in the EU country, making returns and payment in those countries.
Proposed changes to VAT MOSS
From 2018 the VAT MOSS arrangements will only apply to sales in excess of €10K pa. This will not only remove the administrative burden for VAT registered businesses with small levels of online services but will also take many non-VAT registered businesses out of VAT MOSS.
In addition VAT MOSS businesses will see the following relaxations:
- For cross-border sales below €100K pa, only one piece of evidence per sale will be needed (currently two)
- Use of UK, not EU, invoicing rules
- 30 days to complete the VAT MOSS return (currently 20 days)
- VAT MOSS records will no longer have to be kept for ten years
Proposed changes to other services and goods sold online
From 2021 the above VAT MOSS system will be rolled out to all online sales of services and goods to EU consumers, dropping the “Mini” to become the OSS portal. This will abolish the current lower limits for goods sales of €35K or €100K.
In addition the current exemption for small (<€22) imports of goods from outside the EU will be abolished and non-EU sellers will be able to join the OSS.
Here is a link to the EU’s Q&A press release.
