If your business sells digital services to the EU from the UK there are significant changes to VAT on selling digital services reporting post-Brexit.
Digital services include things like website hosting, broadcasting, telecommunications services, video on demand, downloadable music, games, apps, software and ebooks. If you supply any of these to EU member states and you forecast to make more than £8,818 of sales (including VAT) in a calendar year, then you must do one of the following:
- register for VAT in each of the countries you trade with, or,
- Register for the MOSS (Mini One Stop Shop) Scheme
My company is already a member of UK MOSS, do I need to register?
You can use your existing MOSS account to declare all sales VAT up to 31 December 2020. But, you will not be able to use the UK’s VAT Mini One Stop Shop (VAT MOSS) service to declare sales and pay VAT due in EU member states after 1st January 2021. After this date you need to re-register.
There are two schemes running under MOSS:
- the union scheme, for businesses established in the EU or with at least one branch based in an EU country
- the non-union scheme, for businesses not established in the EU and without any branches based in the EU
If your business does not have a head office or branch in an EU member state you will need to set up a non-union scheme. Firstly, You have to designate a member state of identification. This can be any EU country you choose and can be done online through your designated member-states identification portal. Once your registration details have been received and validated, they will be stored in a database and forwarded by your member state of identification to all other EU countries. For a list of EU member states and quick links go to: https://europa.eu/youreurope/business/taxation/vat/vat-digital-services-moss-scheme/index_en.htm#outsidetheeu
VAT rules
You will be allocated a VAT number by the EU country you have chosen to be your member state of identification and charge VAT at the rate of the EU countries where your customers reside. You should apply the same invoicing rules as your member state of identification (an invoice is not required in most countries when supplying services under the MOSS scheme). Please remember, these VAT returns are made in addition to your normal UK domestic VAT returns.
For more information about MOSS, please go to: ec.europa.eu/taxation_customs/business/vat/telecommunications-broadcasting-electronic-services/
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VAT on Selling Digital Services Post-Brexit: Understanding the New Regulations
Since the United Kingdom’s departure from the European Union, there have been several changes in the taxation of digital services, particularly regarding Value Added Tax (VAT). The implementation of new regulations has had a significant impact on businesses selling digital services to customers in the UK and the EU. The details of VAT on selling digital services post-Brexit, highlighting the key changes and their implications for businesses.
Previous arrangements
Prior to Brexit, businesses selling digital services in the EU were subject to the VAT rules of their country of establishment. However, with the UK’s exit from the EU, new regulations were introduced to ensure a fair and consistent VAT treatment for all member states and the UK.
Changes in VAT Rules
The most significant change in VAT rules post-Brexit is the introduction of the “One-Stop-Shop” (OSS) scheme. The OSS scheme simplifies VAT compliance for businesses by allowing them to register for VAT in one member state or the UK and declare their VAT obligations for all EU member states. This means that businesses can avoid the need to register for VAT in each individual EU member state where they have customers.
For UK-based businesses selling digital services to EU customers, they can opt to register for the Non-Union VAT MOSS (Mini One-Stop-Shop) scheme. This enables them to report and pay VAT due on their EU sales through a single return filed in the UK. The Non-Union VAT MOSS scheme ensures that UK businesses can continue to benefit from simplified VAT procedures when dealing with customers in the EU.
Impact on UK Businesses
The changes in VAT rules have both positive and negative implications for UK businesses selling digital services. On the positive side, the OSS scheme simplifies the VAT compliance process and reduces administrative burdens. Businesses can now handle their VAT obligations centrally, leading to cost savings and improved efficiency.
However, one notable challenge for UK businesses is that they are no longer able to benefit from the VAT threshold when selling digital services to EU customers. Previously, businesses with an annual turnover below the VAT registration threshold in their own country were exempt from charging VAT. With the new regulations, this exemption no longer applies, and businesses must charge VAT on all digital services provided to EU customers, regardless of their turnover.
Impact on EU Businesses
For businesses based in EU member states selling digital services to UK customers, the VAT rules have also undergone changes. These businesses are now required to register for VAT in the UK if their sales to UK customers exceed the UK VAT registration threshold. This introduces additional administrative tasks and potential complexities for EU businesses, as they need to familiarise themselves with the UK VAT system.
VAT on selling Digital
The VAT rules on selling digital services post-Brexit have brought significant changes for businesses operating in the UK and the EU. The introduction of the One-Stop-Shop scheme has streamlined VAT compliance, allowing businesses to handle their VAT obligations more efficiently. However, the loss of the VAT threshold exemption for UK businesses and the need for EU businesses to register for UK VAT present challenges.
To navigate the new regulations successfully, businesses are advised to seek professional advice and ensure compliance with the VAT rules of the respective jurisdictions. Staying informed about updates and changes in VAT regulations is crucial for businesses selling digital services to maintain compliance and avoid any potential penalties or disruptions to their operations.
