EU 2015 digital VAT changes disappoint
The European Commission has reported that fewer than 7,000 businesses, which includes 500 non-EU companies, have registered under the new MOSS 2015 VAT reporting portals around the European Union. This compares to the previously estimated hundreds of thousands of EU businesses that could be affected – 200,000 in the UK alone.
2015 VAT changes shift tax flows between EU member states
The UK’s HMRC has estimated that the 2015 B2C digital VAT change could generate more than £300m per annum for the UK in additional revenues. This would mainly be generated by providers of e-services located in Luxembourg switching from charging between 3%-15% Luxembourg VAT to their UK customers, to charging the UK’s 20% VAT rate.
Luxembourg has been forced to raise its own standard VAT rate from 15% to 17% to compensate for its losses. Although Luxembourg will receive VAT compensation of €1.1bn from other member states in return.
The low registration numbers could indicate that many companies are unaware they now need to collect foreign VAT for the first time. Meanwhile, micro-businesses in the UK, drawn into the EU VAT regime for the first time by the 2015 changes, may have possibly decided to stop selling into Europe because of the new administrative burden.
The lack of registrations from non-EU companies could also indicate a number of providers are possibly undercutting EU rivals by not complying and charging VAT.
2015 VAT changes on electronic services
Since 1st January 2015, all providers of electronic, broadcast and telecoms services to consumers in the EU must charge the VAT rate of the consumer’s country of residence. They must then declare and pay the foreign VAT through their local Mini One-Stop-Shop portal, which then distributes the VAT to the appropriate EU member state.