There are significant changes to the VAT treatment when supplying digital services within the EU. These changes apply even if you are not VAT registered. You are now required to register for VAT if you provide digital services to non-businesses in other EU countries.
What are digital services?
“Digital services” is a broad term that primarily involves the provision of services transmitted by technology. The Revenue provides the following examples, which is not an exhaustive list:-
Broadcasting: the supply of television or radio programs
Telecommunications: fixed and mobile telephony, fax and connection to the internet
e-services: video on demand, downloaded applications (commonly known as “apps”), music downloads, gaming, e-books, anti-virus software and online auctions.
You may use an intermediary to provides digital services, then the intermediary may be responsible for making the supply and therefore accounting for the VAT.
If the customer agrees a contract with the Intermediary and receives an invoice in the intermediary’s name rather than yours, this suggests the intermediary is responsible for making the supply. If you are in any doubt, please contact the intermediary to check.
What is changing?
Usually, when services (as opposed to physical goods) are sold to non-businesses in other EU countries, the seller must account for the VAT in the seller’s country. However, from 1 January 2015, sellers of digital services to non-businesses must now account for VAT in the country in which their customers are based.
What do I need to do about VAT on digital services?
The above might give the impression you need to register in every member state of the EU. This would be a time-consuming and laborious process. It would involve learning other countries’ VAT registration and VAT return submission rules and overcoming language barriers.
Fortunately, there is a simpler method of dealing with registering in all other EU countries. There is the option to use the Revenue’s VAT mini one stop shop (“MOSS”). This allows you to submit an online VAT registration only once in the UK.
It removes the requirement for you to register your business separately in all other EU countries. You file a quarterly return to the Revenue reporting the VAT on the EU sales and pay the VAT due to the Revenue.
The Revenue will then forward the relevant information and VAT payment to the equivalent of the Revenue in each EU country from which you earned income. You will, of course, need to keep track of how much you sell in each EU country in order to complete this quarterly return.
In order to register for VAT using the MOSS, you will need to register for VAT in the UK first. This does not mean you will be required to account for VAT on your UK sales if your income is below the registration threshold of £82,000.
You will just need to file nil returns (zeros in all the boxes) for each quarter for your UK VAT return, with the MOSS return being completed with details of your EU sales.