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Thursday, June 19, 2014

MOSS will gather all the key EU VAT information

EU Value added tax
The MOSS system allows VAT reporting
From January 1, 2015, all EU-based businesses with B2C sales of digital services can opt to join the Mini One Stop Shop (MOSS) online service from January 1, 2015. MOSS has been introduced as a result of the 2015 VAT changes. The system is the result of efforts on the tax authorities’ part to reduce red tape for businesses.

The MOSS system is voluntary and is also very straightforward. The choice that eMerchants face come January 1, 2015 (or before that as, for example, registration with the UK MOSS system opens in October 2014) comes down to whether they believe they can achieve VAT compliance with the help of the MOSS system or on their own.

Merchants have the option to register with the MOSS system, when they do the EU member state they register with will become known as the Member State of Identification (or MSI).

EU VAT information
The MOSS system is designed for digital product businesses
MOSS itself is a web portal through which merchants can register and then quarterly declare all of the VAT collected on their digital sales in the EU.

The MSI, in turn, will then distribute this VAT revenue to the tax authorities in the EU member states where the sales took place. It’s a simple system and one that should be utilised by most merchants with B2C digital sales in the EU, regardless of size. This is also a key point: the 2015 VAT changes do not discriminate all merchants must comply with the new rules regardless of transaction volume or profit margin.

A merchant can voluntarily choose to leave the MOSS system at any time. There is one stipulation though. If a merchant leaves, they will not be allowed to rejoin in any EU member state for two calendar quarters from the time of departure.

There is also the possibility of de-registration from the MOSS system. HMRC, the UK’s tax authority, outlines how this could happen in a guidance document:

“VAT MOSS is a voluntary scheme. If you decide to join the scheme but fail to meet the legal requirements of its use, you may be deregistered from the scheme by the MSI tax authority and excluded from using VAT MOSS anywhere within the EU for a period of up to two years. Legal requirements include submitting declarations and payments on time. The alternative to using the VAT MOSS scheme is to register in every Member State in which you make B2C digital supplies.”

Registering in every EU member state may not be feasible or logistically possible for a large amount of merchants, especially small- to medium-sized enterprises. This has to be taken into account when a decision is to be made regarding which registration path to take for the quarterly payment of VAT receipts.

A merchant will be required to submit their MOSS return electronically to the Member State in which they are registered within 20 days of the end of a calendar quarter return period.
The four MOSS reporting periods will be:
  • January 1 to March 31
  • April 1 to June 30
  • July 1 to September 30
  • October 1 to December 31
The MOSS system has some real advantages in terms of reducing the administrative burden on merchants. The EU are well aware of the increased burden of proof placed on merchants through the 2015 VAT changes so the MOSS system is a balancing act. Again, it’s optional so it’s up to merchants to register or not.

Image source: Malawi RA, PD