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New rules for VAT on digital services

23 Dec 2014

1 January 2015 sees the introduction of new place of supply rules for VAT, affecting those businesses supplying digital services to consumers within the EU.

Under the new system, VAT on digital services (including broadcasting, telecommunications and e-services) will be payable in the consumer’s country, rather than the supplier’s country.

A new VAT Mini One-Stop Shop (VAT MOSS) scheme also comes into effect on 1 January, with the aim of reducing administrative burdens on businesses following the introduction of the new rules.

The scheme is optional and allows taxable persons to avoid registering in each Member State in which digital services are provided.

UK businesses registering for the scheme will submit a single VAT Return and payment to HM Revenue & Customs (HMRC), who will then forward the necessary documents and payment to the tax authorities in the relevant Member States.

Between 27,000 and 42,000 UK businesses are expected to register for VAT MOSS.