New EU VAT regulations for telecommunication, broadcasting and electronic services

From 1 January 2015, telecommunication, broadcasting and electronic services will always be taxed in the country where their consumer belongs – regardless of whether the customer is a business or consumer – regardless of whether the supplier based in the EU or outside.

 

Starting from 1 January 2015, B2C supplies of telecommunication, broadcasting and electronically supplied services provided to non-taxable customers within the EU will be treated as supplied in the EU Member State where the recipient of the service is established, has a permanent address or usually resides.

 

Therefore suppliers of such services now will need to determine where their customers are established or usually reside and will need to account for VAT at the applicable rate in that Member State. This is

a requirement irrespective of where the supplier itself is established or registered for VAT and even irrespective of whether the supplier itself is located in Euro Zone. Therefore, suppliers may need to register for VAT in all EU Member States where they have customers. New regulations do not provide any minimum thresholds for VAT payment obligation; it means that even making supplies to just one customer in one Member State will require official VAT registration in that country.

 

New regulations provide an alternative to obtaining multiple VAT registrations in each Member State where a supplier has a customer, affected suppliers may be able to opt to account for VAT across the EU via a single electronic declaration. This return can be filed with the tax authority where the supplier is established (the “Member State of identification”). This system is known as the Mini One-Stop Shop (“MOSS”) scheme when B2C supplies made in all 28 EU Member States shall be reported on a single electronic return.

 

This innovation has an essential influence on telecommunication, broadcasting and electronic service business because it concerns both European and non-European suppliers who provide services for European consumers. Implementing the Client Identification and European VAT Registration System, as well as VAT payment, shall force suppliers to redesign and to restructure their business.