Place of supply for telecommunications, broadcasting and electronically supplied services: The final phase!

Nick Ryan — Wed, 26 Feb 2014 18:54:16 +0000

With effect from 1 January 2015 the final piece of the VAT Package jigsaw will fall into place, the picture will be complete though a little blurred in parts and some pieces straining to fit with one another.
From the 1 January 2015 the place of supply for these services to consumers will shift from where the supplier is established to where the customer is located. To accompany this change will be the introduction of the Mini One Stop Shop aka MOSS. Moss is the EU Commissions’ accounting carrot that will look to simplify the VAT reporting and compliance requirements for businesses in managing this change. It is optional and a business can elect to register for VAT in each of the EU Member State in which customers reside and who receive services from them. Unlike distance sales, there is no VAT registration threshold to consider and a local VAT registration is required irrespective of the level of sales made in each EU Member State.
For distance sellers the ongoing pain of multi-jurisdictional VAT registrations will continue while for telecoms, broadcasting and electronic services suppliers there will be the simplified VAT registration option whereby the business can manage the supplies of these services under one VAT registration which will identify, report and account for VAT for services to customers in the EU under one quarterly VAT return. The EU Member State where the business is registered for VAT under MOSS will then distribute the VAT due to the respective EU Member States where services have been provided. It should be noted though that this system does not encompass the offsetting of VAT incurred by the business on taxable operating costs; the business will need to seek refunds for these under the EU VAT refund system.
Sounds straightforward? With all things VAT there comes a catch or three and the management of VAT in conjunction with the risk of error have to be met. A telecoms/broadcaster/electronic service provider will need, either if they already do business in the EU or, are looking to enter the market, to establish a number of points over the next six to eight months:
• Will they need to register for VAT in the EU, if so, which EU Member State suits?
• Which EU Member States is its customers residing in.
• How do I verify my customer’s status?
• What determines the place of supply for my services i.e. telephone kiosk/internet cafe and, what if I provide my service on board transport?
• How can I identify the customers EU Member State easily – what processes do I put in place to manage this?
• What are the VAT rates applicable for each EU Member State for the services I provide?
• How do these VAT rates impact on my margin/cost base?
• What if I also provide services to businesses?
• How do I manage VAT reclaims for business/operating costs?
These are some of the questions that a business will need to clarify and resolve in advance of 1 January 2015 and for which we can assist them with. A business will need to implement any changes to its accounting, IT and other sales reporting systems in order to capture the information required and ensure VAT is accounted for correctly. These measures will need to be taken well in advance of 1 January 2015 in order to be ready and we would recommend that any business should weigh up the pros and cons for it in either opting for MOSS or taking the multi-jurisdictional route for registration. Businesses servicing B2B and B2C customers will need to ensure they can clearly separate the services and report VAT correctly.
For some businesses MOSS might not be practical and they will be required to put in place multi-jurisdictional VAT registrations and the administrative nightmare this can provide for, not forgetting both the reporting requirement variances and associated set up costs.
MOSS does indeed provide for a simplification in the accounting and reporting of VAT and is very welcome. Like all simplified procedures there is a catch in that there will be an increased cost for a business in administering the VAT though anything that prevents the requirement for multi jurisdictional VAT registrations should be welcomed.
Distance sellers will be both frustrated and disappointed that the scheme was not considered for their purposes. Considering the variances of requirements for registration that distance sellers face together with the additional financial costs to them in merely arranging a VAT registration let alone the language, processing and management variances, MOSS would be a welcome facility.
Time does not stop and businesses within this sector will need to start the assessment process now in order to be sure to be ready by 1 January 2015. For further information on MOSS, the place of supply rules for services or, for assistance in assessing your business in readiness for the introduction of this change then please contact Nick Ryan on advice@thevatpractice.ie or +353 238838181.

When is an Export not an Export: VAT is the question!

Nick Ryan — Tue, 27 Sep 2011 14:48:00 +0000

For VAT purposes the Revenue consider an exporter to be a person that supplies goods to another person and where the goods are directly dispatched to a destination outside of the European Union. In this instance the zero rate of VAT applies to the supply of the product. Simple enough?
Surely it can’t be that hard for a business to know whether they are an exporter or not. Well from recent experiences it is and the scenario below should help you in seeing where the problems lie.

Five businessmen meet at a networking event:
Bus 1: What do you do?
Bus 2: I’m an exporter, I sell used car parts to wholesale businesses in Africa.
Bus 1: I’m also an exporter, I sell a range of beauty therapy products through my online store to customers in Europe.
Bus 3: (overhearing the conversation) You both exporters? Me too, I sell used electronic equipment and games both via online auctions to customers mainly in the EU and also by container to the African markets.
Bus 4: No kidding you all exporters. I export bespoke iron furniture to customers around the world. Some customers are great as they reduce my costs by taking delivery of my product at my factory.
Bus 5: I don’t believe this, you all exporters, I am too. I provide technical desk support services to a number of clients in the Middle East in managing their IT functions.
Trade stand representative: You sure you guys are all exporters?

Can you all see why the Trade stand representative is worried? For VAT purposes, only one of these businessmen is a 100% exporter and two have aspects of their business activities that would qualify them as exporters. The others are not exporters at all. For the e-trader they have significant issues were they to apply the VAT export status to their supplies.

In essence these five businessmen between them are:
 Exporting goods.
 Operating under distance selling arrangements.
 Falling within the VAT Package for supplies of services.
 Providing supplies of goods within the State.
If they are driven to believe they are all exporters then there is a significant range of VAT errors occurring both in liability to VAT and in the reporting of VAT. Now do the math.
In the current climate the use of the word “export” has widened in our search to find signals of recovery and economic hope. The problem is that, in the current climate, a number of businesses have been loosely labelled “exporters” and, as such, have applied the VAT definition to their activities when they clearly are not. The ramifications of this can be pretty damaging as many businesses in the belief that they are exporters have taken that classification and applied it in order to determine their VAT status.

So what happens when the maths do not add up?

We at the VAT Practice can provide businesses with the immediate assistance they need to redress matters. Where problems are identified then provide a solution that provides for the best result and minimises any cost to the business in correcting matters. Also we can assist the business in putting the VAT reporting and compliance systems in place that get the VAT liability right and provide for better security and minimise the potential for ongoing risk.
For those involved in distance sales there is a need to constantly monitor sales in order to determine whether other jurisdiction VAT registrations are required and, then manage these other jurisdiction VAT registrations for future sales. We can assist here from the provision of tailored support tools for monitoring sales per territory to the cost efficient management of that VAT registration.
For more information on this or to discuss a particular concern then please contact Nick at the VAT Practice on 0238838181 or advice@thevatpractice.ie.

The Vat Practice, Cork. Ireland » vat and e-sellers

Place of supply for telecommunications, broadcasting and electronically supplied services: The final phase!

When is an Export not an Export: VAT is the question!