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VAT on Digital Services

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On 1st January 2015 there is to be a change in the way VAT operates on the provision of digital services to non-business customers based in another EU country.

Digital services are defined as any type of service which is delivered electronically including such things as e-books, online auctions, music downloads, & anti virus software. It will also include broadcasting services and telecommunications services as well as digitised software products.

With effect from 1st January 2015 digital services are to be treated as being supplied in the country where the recipient of those services is based. Whilst any services provided to UK residents or EU businesses are not affected by the change, it is those customers who are non-business customers and who are based in another EU country that the change in the rules are going to impact on.

Strictly these changes would impose a requirement for the suppliers of the digital services concerned to register for VAT in each EU country concerned and to comply with the VAT regulations in that country. Fortunately a scheme has been devised in the UK to deal with the requirements under the new rules and is refered to as the VAT Mini One Stop Shop (MOSS).

This system requires you to only register once under the scheme and to make a quarterly return WITHIN 3 WEEKS OF THE END OF THE QUARTER, of the sales that have been made to non-business customers in the EU on a country by country basis. Payment of the VAT due is to be made at the same time.

It is then up to HM Revenue & Customs to deal with each EU country concerned. You may note the timescale is shorter than for filing of normal VAT returns

In additon if no such sales are made in any quarter, a nil return is required once registration has been made. Naturally an extended period of nil return could mean deregistration is appropriate. However, if you deregister you cannot rejoin for a 2 quarter interval. This would strictly mean if you did then make a sale before you were eligible to register again you may be required to comply with each national law on VAT. Thus once registered it would be wise to stay registered but make nil returns as the administration of dealing with a foreign jursdiction would far outweigh making nil quarterly returns.

Registration can take place any time after 20th October 2014 and should you require our assistance please let us know.

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