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Tax in Focus
for 2015 New EU VAT Rules
Finbarr O’Connell - Head of VAT
Finbarr O’Connell joined Grant Thornton in 2006 and is the Irish representative on Grant Thornton’s European VAT group. Finbarr lectures on VAT issues for various professional bodies as part of their formal tax qualifications as well as their Continuous Professional Development programmes.
Grant Thornton’s VAT team provides advisory and compliance services to an extensive range of
across
clients all
operating industries
including financial services, construction, professional services, IT and retail businesses.
Finbarr O’Connell Head of VAT –
Grant Thornton Dublin
T: +353 1 6805771 E: finbarr.oconnell@ie.gt.com
“The 2015 changes are part of a range of measures which have been introduced in the period 2010 to 2015. Collectively, these changes are known as “The VAT Package”. It’s very important that businesses operating across several countries are aware of these changes so that they can be incorporated into their business model.” Grant Thornton’s Finbarr O’Connell discusses imminent changes to VAT rules within the European Union.
Specific changes in 2015 There is less than a year to go to the introduction of the 2015 VAT changes which will impact on supplies of telecommunications, broadcasting and electronic services.
Services are affected The changes will apply to EU based suppliers of such services to consumers. There is no change to the treatment of supplies made to businesses.
Telecommunications, broadcasting and electronic services are affected by the changes. Electronic services are paid-for services that are delivered over the internet or other electronic network, in a way that is essentially automated and cannot be delivered without information technology. Included are access to and downloading of screensavers, ringtones, music, films, online games, e-books and
online information
such as traffic, news and weather reports, and subscriptions to digital newspapers or magazines. Software upgrades meet the definition, as do website hosting, banner blocking software, automated
firewall installation, remote systems administration and online data warehousing. The category also includes fees charged to access software on the ‘cloud’.
Where a supplier is supplying consumers indirectly through an online store or gateway and the online store or gateway is acting in its own name, then they will normally be considered to be supplying the consumer. This means that the online store or gateway will be responsible for the VAT on the supply of the services to the consumer. The supplier is regarded as making its supply to the online store or gateway which is a B2B supply rather than a B2C supply. The changes described below do not apply to such supplies, i.e. they are confined to B2C supplies.
Changes in the VAT treatment With effect from 1 January 2015, EU based suppliers of the affected services will be obliged to account for local VAT based on where the consumption of the services takes place within the EU. At present such suppliers account for VAT wherever they are established.
To account for local VAT EU based suppliers will need to choose one of the following options: • Register in all EU Member States where the business has consumers – potentially need to register in all 28 Member States– need to be mindful of different VAT returns, language barriers, frequency of filing
• Register in the Member State where the business belongs using the Mini One Stop Shop (MOSS) – one quarterly VAT return where sales to consumers in the Member States are reported, filed with the local tax authority which will then allocate the VAT payment to the individual Member States
It is important to note that the change in the place of supply to the Member State of consumption will require businesses to consider the VAT rules applicable in those Member States to matters such as invoicing, cash accounting and bad debt relief.
Determining where consumption takes place The EU VAT Regulation No 1042/2013 of 7 October 2013 sets out the rules to determine where the