You may (or may not) have heard by now that the EU are introducing new rules surrounding VAT on digital goods from the 1st Jan 2015. We’ve been aware of these changes for a while now and have been working on some solutions in order to make these changes a little easier to handle. If you’ve not heard about these new rules, this sums them up:
On 1 January 2015 the VAT rules for cross-border B2C supplies of ‘digital services’ (i.e. broadcasting, telecoms and e-services) will change. From that date, VAT must be accounted for in the member state where the customer normally lives, rather than where the supplier of the service is established. – HMRC, Brief 46
And as John McCarthy, CEO of Taxamo puts it, “These new rules flip EU VAT on its head”.
The new EU VAT rules on the supply of digital services affect all companies (EU and non-EU) that sell to consumers inside the EU.
To be compliant you’ll need to do the following:
- Charge the correct country VAT rates based on customer’s location.
- Validate the customer’s location and ensure there are 2 pieces of non-conflicting evidence stored (e.g. a billing address and a matching IP Address).
- Report your VAT to each EU state, or use a MOSS (Mini-One-Stop-Shop) which reports to each EU state on your behalf.