Q - What are digitally delivered services?

Any digital product or service that’s delivered over the internet with minimal or no human involvement. For instance, if a Pdf is manually emailed by the seller, it isn't considered to be electronically supplied and it isn't covered by the new rules, on the other hand, if the Pdf is delivered automatically by an email automation software, it’ll fall under the new rules.

 

Q - How to determine whether a transaction is B2B or B2C?

If a customer supplies a VAT registration number while making a purchase, it must be treated as a business to business supply. If a customer doesn't have a VAT registration number, it will be considered a business to consumer supply. 

 

Q - How will the new rules affect Non-EU businesses?

The new rules have not changed a lot for businesses located outside the EU. Because they were already responsible for charging VAT on sales made to EU customers. Though the rules have not been enforced yet and the EU wants to change that with the new ruling in place. 

 

Q - What if a customer has signed up for a digital subscription based service?

Any transaction that has been carried out after 1st of January 2015 has to comply with the new rules. If a customer had signed up for a quarterly subscription for a period of 12 months in April 2014, supplies made in the first three quarters will fall under the old VAT rules. The final supply, that’s made in 2015, will fall under the new rules.

 

Q - Is the VAT registration threshold removed?

The VAT registration threshold exists for EU businesses selling within their own country or outside Europe. However, for making supplies in other EU countries, businesses are required to register in each country individually or use MOSS, and in that case, VAT registration is required. 

Though, HMRC has made changes to the rules in the UK. Because of which UK businesses will be able to separate their domestic sales and enjoy the benefit of the VAT threshold. Thus, they have to implement the new rules only for sales made to other EU member states.

 

Q - How soon should I register for MOSS?  

Registration should be done by the 10th day of the month following your first digital services sales across any of the EU countries. So, if you make your first EU sale on the 2nd of January, you’ll have to register by the 10th of February.  

 

Q - Is it necessary to register as a data controller?

Yes. Because you’ll be collecting personally identifiable customer data as proof of location, you’ll be required to register as a data controller in the country where your business is established. In the UK, you need to register with the Information Commissioner’s Office.

 

Q - What Should i do if I sell through an intermediary?

If you sell your digital services through a platform like Apple’s app store or Etsy, the platform is responsible for invoicing the customers and account for VAT in customer’s country. However different platforms are implementing this in different ways. So you’ll have to perform an out-and-out check on the following, if you're responsible for any of these, you'll have to account for VAT  -

  • Who is responsible for authorizing the transactions?
  • Who authorizes delivery of the services? 
  • Whose terms and conditions are being accepted by the customer?  

 

Q - How will other member states carry out audits?

The requirement for storing data for 10 years arises out of the same reason. If a member state requests the host state for an audit on a business, the host state will notify other member states where the business makes sales and check if they’d be interested in an audit. If they’re interested, they’ll be required to justify why it’s required and the host member state will accordingly arrange an audit. 

 

Q - What are invoicing requirements? 

Invoicing requirements are different for different member states. As the new rules only apply on B2C sales, invoicing will not be required in most member states and some will require simplified invoices. 

 

Q - How can I voice my concerns?

You can write to the responsible officials in your government. If you’re a member of a regulatory body, get in touch them so that they can voice out the impact that these rules will have on your profession. Sign the petition that requests a unilateral suspension of the introduction of the new EU VAT laws for micro businesses.