HMRC has published guidance on the new VAT place of supply rules, which come into effect on 1 January 2015. Those rules will apply to business to consumer (B2C) supplies of broadcasting, telecommunications and e-services (‘digital services’). These supplies will be taxed at the rate applicable in the consumer’s member state; currently the rate is determined by the location of the supplier of the services.
The purpose of the guidance, which has been produced in consultation with tax authorities and businesses across the EU, is to help businesses to prepare for the rule change, as well as to decide whether or not they should register to use the related EU VAT Mini One Stop Shop (MOSS) simplification scheme. HMRC recommends that businesses also consult the detailed explanatory notes published by the European Commission.
The guidance provides the following rough definitions of the three categories of services covered, observing that this is a rapidly evolving sector and that the list cannot be exhaustive.
For supplies of digital services to consumers through an online portal, gateway or marketplace, if the platform operator sets the general terms and conditions, authorises payment or delivery, or does not clearly state the name of the supplier on the receipt or invoice issued to the consumer, it will be the supplier even if it is contractually only an agent.
If the recipient of the supply cannot provide a VAT registration number (VRN), it should be treated as a consumer.
The guidance suggests making the following presumptions to ascertain the location of the consumer. If the services are supplied:
through a telephone box, a telephone kiosk, a wi-fi hot spot, an internet café, a restaurant or a hotel lobby, the place where the phone box/kiosk is located;
on board transport travelling between different countries in the EU (for example, by boat or train), the place of departure for the consumer’s journey;
through an individual consumer’s telephone landline, the place where the landline is located;
through a mobile phone, the country code of the SIM card; and
through a decoder, the postal address where the decoder is sent or installed.
These presumptions can be rebutted using alternative evidence (three pieces of evidence will be required).
If the presumptions listed in the guidance do not apply, HMRC recommends keeping records of two pieces of non-contradictory evidence; for example, the billing address of the customer, the internet protocol (IP) address of the device used by the customer or the location of the bank.
The guidance also covers transitional rules as well as the application of the rules to automated services such as distance learning, and computerised examination services.
Finally, the guidance explains how the VAT MOSS will work. The scheme will enable EU businesses to account for VAT on all of their B2C digital supplies to consumers in member states where they are not established, by submitting a VAT MOSS return electronically to the member state in which they are registered. However, if these businesses have registered fixed establishments, they will need to separately declare the value of B2C digital supplies made from these establishments.
HMRC has published guidance on the new VAT place of supply rules, which come into effect on 1 January 2015. Those rules will apply to business to consumer (B2C) supplies of broadcasting, telecommunications and e-services (‘digital services’). These supplies will be taxed at the rate applicable in the consumer’s member state; currently the rate is determined by the location of the supplier of the services.
The purpose of the guidance, which has been produced in consultation with tax authorities and businesses across the EU, is to help businesses to prepare for the rule change, as well as to decide whether or not they should register to use the related EU VAT Mini One Stop Shop (MOSS) simplification scheme. HMRC recommends that businesses also consult the detailed explanatory notes published by the European Commission.
The guidance provides the following rough definitions of the three categories of services covered, observing that this is a rapidly evolving sector and that the list cannot be exhaustive.
For supplies of digital services to consumers through an online portal, gateway or marketplace, if the platform operator sets the general terms and conditions, authorises payment or delivery, or does not clearly state the name of the supplier on the receipt or invoice issued to the consumer, it will be the supplier even if it is contractually only an agent.
If the recipient of the supply cannot provide a VAT registration number (VRN), it should be treated as a consumer.
The guidance suggests making the following presumptions to ascertain the location of the consumer. If the services are supplied:
through a telephone box, a telephone kiosk, a wi-fi hot spot, an internet café, a restaurant or a hotel lobby, the place where the phone box/kiosk is located;
on board transport travelling between different countries in the EU (for example, by boat or train), the place of departure for the consumer’s journey;
through an individual consumer’s telephone landline, the place where the landline is located;
through a mobile phone, the country code of the SIM card; and
through a decoder, the postal address where the decoder is sent or installed.
These presumptions can be rebutted using alternative evidence (three pieces of evidence will be required).
If the presumptions listed in the guidance do not apply, HMRC recommends keeping records of two pieces of non-contradictory evidence; for example, the billing address of the customer, the internet protocol (IP) address of the device used by the customer or the location of the bank.
The guidance also covers transitional rules as well as the application of the rules to automated services such as distance learning, and computerised examination services.
Finally, the guidance explains how the VAT MOSS will work. The scheme will enable EU businesses to account for VAT on all of their B2C digital supplies to consumers in member states where they are not established, by submitting a VAT MOSS return electronically to the member state in which they are registered. However, if these businesses have registered fixed establishments, they will need to separately declare the value of B2C digital supplies made from these establishments.
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