VAT Changes affecting companies supplying broadcasting, telecommunications and e-services (BTE)

Managing Director Neil Arthur explains how UK companies providing BTE services will be affected by VAT changes next year.

With effect from 1st January 2015 changes will be made regarding the VAT treatment on the supply of broadcasting, telecommunications and e-services (e.g. downloaded music, games, etc) for business to consumer (B2C) transactions across the EU. Consumer in this instance means a private individual.

Starting from this date the place of supply will be considered to be the location of the consumer, whereas currently the place of supply (and therefore the place of taxation) is considered to be the location of the supplier.  This change will mean that for each relevant sale UK suppliers (for example) will need to determine the location of the customer and the VAT rate applicable in that jurisdiction. Therefore, HMRC have issued guidance on how to determine the location of customers and the records that need to be maintained, in order to support the supplier’s decision when determining the customer’s location.

Consequently, it will be the responsibility of the supplier to account for the VAT. In order to save suppliers having to register for VAT in each member state where they are providing BTE services, suppliers have the option to use a simplified measure following the change of the place of supply rules. Suppliers will have the choice to submit the so called Mini One Stop Shop (MOSS) returns in a Member State where they are registered for VAT. This MOSS return will in fact be a supplement to the normal VAT return which the suppliers would be filing.

For example, UK suppliers which are registered with the HMRC can submit a single VAT MOSS return and settle the VAT payment, covering all B2C BTE supplies. In consequence, HMRC will account for the tax due to each member state, by sending an electronic copy of the appropriate part of VAT MOSS return, and the related VAT payment, to each relevant Member State's tax authority on the behalf of each supplier.

Business to business supplies to EU customers are unaffected by this change in legislation and will continue to be located in the country of reception and accounted for under the reverse charge rules.

Businesses affected by these changes will need to ensure that they will have the adequate processes in place, in order to obtain the necessary information and records to comply with the new VAT rules.

Neil Arthur
Neil  Arthur
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