Digital services suppliers get one-stop EU VAT service

Businesses supplying digital services – broadcasting, telecoms and e-services such as smartphone games and other apps – across the European Union will be able to use a one-stop VAT service from January. 

This will mean that they do not have to pay the tax separately in each country where they do business. 

Businesses affected include those selling apps (including smartphone games), e-books, streaming services (of sports/ film/ tv/ music), radio broadcasting, dating services and journals, newspapers and magazines that are subscribed to electronically. 

From 1 January next year, the place of supply – and therefore the place of taxation – for business-to-consumer suppliers of digital services will change to the place where the customer who receives the service lives or is located. 

So that UK businesses supplying digital services do not have to register for VAT in every EU member state where they have customers, an optional VAT Mini One Stop Shop online service – VAT MOSS – has been set up by HM Revenue and Customs (HMRC). Other EU member states will be building their own systems.  

Sally Beggs, Deputy Director Indirect Tax, HMRC, said: 

“The VAT MOSS is a tool that saves digital services suppliers from having to register for VAT in every member state in which they sell such services. Businesses with their main operation or headquarters in the UK will register with HMRC to use the service. They can register for the online service and then authorise an agent to act on their behalf.” 

Between 27,000 and 42,000 UK businesses are expected to register with the service, most of them small-to-medium-sized enterprises (SMEs). 

These changes, under the EU VAT directive, must be implemented by member states before the end of 2014. The UK implementing legislation is contained in the 2014 Finance Bill. 

Businesses will be able to register for VAT MOSS from October 2014. The service will be available to use from 1 January 2015. 

Notes for editors1.     

1.  For more information on the VAT place of supply changes and the Mini One Stop Shop, visit www.hmrc.gov.uk/posmoss

2.  Small to medium-sized enterprises (SMEs) providing broadcasting, telecommunications and e-services (BTE) services that are currently not registered for VAT in the UK because they are below the threshold would have to register for VAT to allow them to use the MOSS service. If they do not register for VAT in the UK, they will not be able to use MOSS and will have to set up for VAT in each member state in which they have customers.