UK wins EU Parliament support on changes to apps, streaming music and video VAT
On Monday 18 May, the European Union Parliament joined the UK in calling for a rethink of the new 2015 EU digital VAT changes.
The January 2015 changes shifted the rules on which country’s VAT rate to charge on sales to consumers of e-services. The reforms also introduced a simplified tax reporting online portal, ‘MOSS’. However, the changes have created widespread confusion for many UK micro businesses that now have to VAT register for the first time.
At Monday’s EU Parliamentary debate on the impact of the 2015 changes, MEPs from Ireland, Germany and the Netherlands confirmed that the poor uptake of the changes is not only a UK problem. Many speakers claimed that the changes are undermining efforts by the EU to nurture its digital economy.
EU Commission to consider €100,000 VAT registration threshold on digital services
During the debate, Andrus Ansip, EC Vice President for the Digital Single Market, called for the introduction of a digital services VAT registration threshold of €100,000 to lift micro businesses out of the new tax net.
He pledged to submit new ideas on the threshold by this summer.
The unexpected support from the Parliament will please David Cameron who had requested a review by the Commission in March. But the member states will most likely resist the EU Parliament’s call for a threshold as this would undermine their tax revenues.
Disappointing VAT reforms on e-services
The 2015 changes were designed to bring EU VAT on consumer electronic services sales of apps, e-books, streaming video, online journals, subscription to membership and dating websites, music and games into line with other services. But less than 10,000 firms have properly registered with the new scheme compared to the 1 million expected by the European Commission.
2015 EU VAT changes background
From 1 January 2015, digital services providers must charge the VAT rate of their EU consumers’ country of residence – previously it had been the VAT rate of their own country. In the UK, where the VAT registration threshold is £82,000 this has meant that micro businesses under the threshold are having to obtain a VAT number for the first time into order to report EU VAT sales through the Mini One-Stop-Shop.
In other EU countries, the EU VAT registration threshold ranges between nil and €15,000 per annum.
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