Digital Services VAT Changes Effective 1 January 2015

From 1 January, EU VAT for digital services is due where consumers are located. Suppliers must either register locally or use MOSS via HMRC, applying each country’s rates. Affected: broadcasting, telecoms, and e-services. Prepare by mapping customers, updating systems, pricing, and compliance processes to maintain accuracy and margins.

Written by TheGenieLab

Sep 27, 2015

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EU VAT Changes for Digital Services: What Businesses Need to Know

Significant changes to VAT accounting for suppliers of digital services — broadcasting, telecommunications, and electronically supplied services — affect businesses supplying such services to consumers in other EU member states. That single-country UK VAT approach no longer works when the place of supply becomes the consumer's country.

Two Ways to Follow VAT Rules

Register for VAT in the country where your customer is located and pay local tax.
Use the Mini One Stop Shop (MOSS) to submit a single quarterly return via HMRC for VAT due in other countries.

If you have substantial sales concentrated in one or two countries, local registration can fit well. If sales spread across many EU states, MOSS simplifies reporting by combining returns through HMRC.

What Services Are Captured?

Broadcasting: TV and radio programs delivered over networks, including subscription packages and internet radio.
Telecommunications: fixed and mobile telephony, fax, and internet connectivity.
Electronically supplied services: website hosting, remote software maintenance, online data warehousing, video on demand, app downloads, music, e-books, and online auctions.

Does This Apply to Me?

If you sell any of the above to consumers in other EU member states, yes. If you sell through a marketplace, the platform operator may be treated as selling directly to the consumer (bearing tax obligations), while other platforms act as an agent taking a commission, leaving you responsible for VAT.

Why This Is Complex

Across the EU, VAT rates range roughly from 5.5% to 27%, with only five states sharing the UK's 20% rate. You must apply the right rate based on customer location, keep evidence of where the consumer is based, and ensure invoices meet local rules.

Practical Steps to Prepare

Map where your consumers are located and find the right VAT rate for each country.
Decide whether local registration or MOSS fits best based on your sales distribution.
Update checkout and billing to keep location evidence and apply the right VAT automatically.
Review pricing to reflect local VAT rates and protect margins.
Train your team and test end-to-end before filing deadlines.

If you have questions, please contact Andrew Norris of Centurion VAT Specialists by email at andrew.norris@centurionvat.com or on 07950 694711.

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