The future of VAT.

There are imminent changes in VAT legislation, many of which will effect E-Commerce businesses, and the profile of Distance sellers throughout the EU has never been higher. Care needs to be taken to be aware of sales figures and comply with the regulations in place so that your business does not put itself at risk of fines and penalties that could impact the profitability or the cash flow of the business.

Tax authorities are focusing their attention on Distance Sellers because they have identified that VAT is a good way to raise revenue in a time when most governments are pursuing austerity measures. Because Distance Sellers collect tax from the consumer – and the VAT is not recoverable by the customer – the money directly benefits the tax authorities.

Sweden and Germany have set up a specialist teams investigating potential businesses Distance Selling into their country; Italy is asking other tax authorities to carry out audits on their behalf; and the UK has a dedicated team responsible for EU VAT administrative co-operation and information exchange arrangements which aim to improve taxpayer compliance and support the fight against VAT fraud.

The likelihood of the tax authorities becoming aware of any undisclosed activities is always rising with increased cooperation between tax authorities, so it is more important than ever that you comply correctly now, and plan for the future.

Place of supply of Electronically Supplied Services.

The final part of the VAT package comes into force in January 2015, and affects those businesses that sell electronically supplied services B2C. The place of supply will change for these services to become where the customer is based –to avoid distortion of competition that currently exists due to differing VAT rates and reduced VAT rate that currently apply across the EU.

Many e-commerce businesses will sell electronic services alongside the delivered goods – e-books and music downloads being prime examples. These companies will need to take into consideration how this change will affect them and how they are going to deal with the new obligations that it will bring about.

Mini-One-Stop-Shop (MOSS).

To overcome the need to register in all the countries where electronic services are supplied, the EU commission has set up the Mini-One-Stop-Shop (MOSS). This will enable businesses that qualify for the scheme to register for VAT in their home territory and collect and account for the foreign VAT on a single VAT return through the MOSS online system. Any business that also sells delivered goods will still have to take the Distance Selling regulations into consideration, and will still have to register for VAT in the Member States where they breach the Distance Selling thresholds.

Going forward it is advised to prepare early for the upcoming new rules, whether this involves putting in place new systems, or updating current ones. Businesses will need to be able to identify the location of their customer and ensure that VAT is collected in the right country; ensure VAT registrations are completed on time, and consider the commercial implications on pricing to allow for maximum profitability.

Accordance is offering free, no-obligation consultations for businesses so that they can find out if the changes will affect them.

Should the impact affect you, Accordance can assist by carrying out a review of your business and providing a tailored plan so that you can ensure you are prepared for the changes.

Who to contact

If you’d like to find out more please contact us at:

+44 (0) 1273 573950