For those longer term readers of my blog you may remember (or have tried to forget) the furore over VAT MOSS when it was introduced in January 2015. Well, two years of contention over the EU's VAT rules regarding the place of supply of digital services - an e-commerce reform targeting wealthy multinationals
which instead devastated online SMEs and micro businesses - came to an end on Thursday with the announcement of a programme of reforms and changes.
Common-sense thresholds
For campaigners, the key demand has been the establishment of a common-sense threshold before EU VAT rules would become
applicable to cross-border sales. Thursday’s announcement confirmed that the European Commission is proposing a threshold of €10,000 in online sales per annum before MOSS rules would apply. Businesses trading under that threshold will be able to apply domestic VAT rules. In support of this proposal, the Commission revealed that just 0.1% of all MOSS revenue has come from returns with a declared turnover of under €10,000.
In addition to the €10k threshold, SMEs which make less than €100,000 in cross-border sales will no longer be required to provide two pieces of data to prove the place of supply of their customers. This requirement had resulted in businesses spending thousands of pounds to reprogram their e-commerce operations in order to collect trivial amounts of European VAT. The EC now says that one piece of evidence will suffice for traders of
e-services.
Further reforms
Other changes relate to the internal administrative burdens created by VATMOSS compliance. Under the reforms, small businesses will be allowed to use domestic VAT rules on invoicing requirements and record keeping. The bizarre requirement to keep all MOSS-related data
for ten years will no longer apply.
In addition, the first point of contact for queries will always be the tax administration where the seller is located. Traders will no longer receive random demands from tax authorities in other countries, a complication which rather defeated the whole purpose of the MOSS system.
The returns process has also come in line for reform. In response to feedback that it is difficult for sellers to collect multiple points of international data within strict filing deadlines, the EC has proposed extending the deadline for MOSS returns from 20 to 30 days following the end of the tax period.
The Commission also wants sellers to be allowed to correct
previous MOSS returns in a subsequent return, rather than having to file amended returns for previous quarters.
MOSS by the numbers
- 95% of all reported issues with MOSS came from the UK
- 2,578
UK traders are MOSS registered
- The average MOSS compliance cost for European businesses is €2,172
- Germany and the UK hold 43% of all MOSS registrations across Europe
- Luxembourg and Ireland are responsible for 70% of MOSS revenues across
Europe
- 76% of non-union MOSS registrations are made through the UK and Ireland
Once accepted, the proposed thresholds and changes would take effect in 2018.
Noel Guilford
Noel Guilford is the principal of Guilford Accounting a small business accountancy practice specialising in advising owner-managed businesses on current accounting, finance, and tax matters. You can reach him via email at noel@guilfordaccounting.co.uk or by phone at 01244 660866. He is the author of the best selling book 'Figure it out - an entrepreneurs guide to understanding your business numbers' which you can obtain by visiting http://guilfordaccounting.co.uk.