Since 1 January 2015, businesses providing telecommunications, broadcasting or electronic services to private individuals have been required to pay VAT on these supplies in the European Union Member State where the private individual receiving the service resides. This can be done via the system set up for this purpose Mini OneStop Shop system (also known as MOSS). However, the business owner may, of course, also choose to declare and pay the VAT due directly in the relevant EU Member State.
Electronic services
Electronic services are, as the name suggests, provided entirely by electronic means. The detailed definition in the Act reads as follows:
– the provision and hosting of websites, and the remote maintenance of software and equipment;
– the supply of software and its updates;
– the provision of images, written documents and information, and access to databases;
– the provision of music or films, games (including games of chance or gambling), and broadcasts or events relating to politics, culture, the arts, sport, science or leisure;
– the provision of distance learning.
This definition is not exhaustive. This means that other services provided entirely electronically also qualify as electronic services.
MOSS
The MOSS system ensures that a business does not have to register in each individual EU Member State in order to pay VAT there. VAT on electronic services supplied to private individuals resident in other Member States is paid in the Member State where the business is established. This is done via a dedicated online portal. The Member States then settle the VAT between themselves.
Businesses based outside the EU that provide electronic services to private individuals in the EU can register with one of the Member States in order to pay VAT on behalf of all Member States via the MOSS system.
The House of Representatives is concerned about whether foreign providers of electronic services are actually paying the VAT due in the Netherlands. This is evident from a recent response to questions raised by Member of Parliament Bashir. State Secretary Wiebes replied that this forms part of the Tax and Customs Administration’s routine checks. However, it is highly questionable whether legislation (and its implementation) can keep (sufficiently) pace with digital developments. The House’s concerns appear to relate primarily to providers from outside the EU. Question 9 specifically asks about the position of Google AdWords.
Small online shop
The obligation to pay VAT in the EU Member State where the private customer resides applies regardless of the level of turnover in that Member State. The idea of introducing a threshold for this – see also our article VAT threshold small online shop, has not yet resulted in any legislative action.
The customer is a business owner
Where the customer is a business for VAT purposes, this issue does not arise. VAT on electronic services supplied to businesses must also be paid in the EU Member State where the customer is resident or established. However, in that case, the liability is reversed to the business customer, who includes this VAT in their domestic VAT return.
Delivery of goods
The MOSS system applies only to telecommunications, broadcasting and electronic services. For other services provided to private customers, the business may still need to register with the tax authorities of the EU Member State in which the private customer resides.
If you’re ordering from an (online) shop goods are supplied to private individuals resident in another EU Member State, the system of the distance selling. This system is explained in our article VAT on sales to foreign private individuals. However, thresholds do apply under the distance selling regulations. See also our article VAT on deliveries to private individuals.
Supplies of goods to businesses in other EU Member States usually qualify as intra-Community supplies.