Stay on the Right Side of VAT MOSS

Do you run an online business? As of 1st January 2015 the VAT rules are changing. Anyone selling digital products to consumers within the European Union will now have to comply with new regulation.

The regulations have sparked controversy among micro-business owners. The fear is that they will make the price of running a small online business too high, damaging innovation and enterprise.


Who is affected?

Businesses selling digital services to consumers in the EU are affected, with some exemptions. The main businesses affected are those that sell telecommunications, broadcasting or electronic services, such as e-books or e-courses.

The new rules were created to stop large companies from diverting all of their European sales through the low-VAT countries. Sadly, they also have an impact on small online businesses that don’t have the funds to cover the costs of making sure they comply.


What is VAT MOSS?

In order to comply, businesses have two choices. You can choose to pay VAT at the place of purchase rather than at the place of sale, meaning that if you sell a product to someone in Germany, you will need to pay the right VAT in Germany, even if you’re based in the UK. This option can be expensive and time consuming as it means registering for VAT in every country where your product is sold.

The alternative is to register for a  VAT MOSS  scheme, which means that your business can make one single VAT payment every quarter. Under this scheme products sold outside of the UK are liable for VAT charges, but domestic sales are not. If you choose this scheme you must keep a record of all sales made and mark sales to the EU for VAT payments.


The Problem for Small Businesses

Many  small businesses  will find the new VAT MOSS rules difficult to implement. Most low- budget payment systems do not capture the information required to ensure you are in compliance. Using a payment system that does gather this type of information can prove costly.


Staying on the Right Side of the Law

You can register for a VAT MOSS scheme here. Once you have registered you will need to submit a single VAT MOSS return every quarter along with your VAT payment.


Top Tips:

  • Check the rules to see if your business is required to comply with VAT MOSS. Some businesses are exempt (e.g. e-courses that give live tutoring).
  • If you do need to comply with the new rules, register for a VAT MOSS scheme.
  • You need to start collecting and keeping details of the EU member states in which your customers live and confirmation from your payment processor of the customer’s billing address.
  • The EU are working to make these new rules as fair as possible for small business owners, so keep your eye out for updates and amendments.
  • If you sell your products through a service provider such as Not On the High Street, Etsy or PayPal, rest assured that they are aware of the new rules and are working on ways to help you comply. Contact your service provider for more information.
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