Since 2015, telecommunications, broadcasting and electronic services have been subject to VAT in the country where the recipient of those services resides. It does not matter whether the recipient is a business or a private individual for VAT purposes.
Business owner or private individual
If the customer is liable for VAT, a entrepreneur In general, this does not pose a problem. Where the customer is established outside the European Union, no VAT is payable under EU law (although it may be payable under the law of the country in which the customer is established).
If the customer is established in another EU Member State, the liability for VAT is reversed to the customer.
Is the customer resident in the EU? private individual in which case the supplier must pay the VAT in the Member State where the customer is resident. Fortunately, for telecommunications, broadcasting and electronic services, this can be done through the tax authorities of the Member State where the supplier is established. Through the Mini One Stop Shop (MOSS) system, they declare the VAT due in all the individual Member States in a single transaction. The Member States then settle the VAT due amongst themselves.
Simplification
With effect from 1 January 2019 Three simplifications will be introduced into this system:
- Businesses established in only one EU Member State, with a turnover of no more than €10,000 from telecommunications, broadcasting or electronic services supplied to consumers in another Member State, may charge VAT at their own country’s rate;
- Businesses based outside the EU can also use MOSS;
- Businesses that use MOSS may apply the invoicing rules of their own Member State (for Dutch businesses, this means that they are not required to issue VAT invoices to private individuals).
In addition, the rules on evidence will be relaxed, also with effect from 1 January 2019. Businesses providing telecommunications, broadcasting or electronic services to consumers are currently required to prove the customer’s place of residence on the basis of (at least) two non-contradictory supporting documents. From 1 January 2019, a single supporting document will suffice. This document must not originate from the service provider or the customer.
With effect from 1 January 2021, two further simplifications to MOSS will come into force:
- the deadline for filing and payment is extended from 20 days to one month (following the end of the calendar quarter to which the MOSS return relates);
- Corrections may be included in the next MOSS return (this must currently be done in the original MOSS return).
These measures are being taken on the basis of a European implementing regulation directly applicable in all Member States of the European Union. The tax plans to be announced on Prinsjesdag 2018 will most likely include the necessary amendments to Dutch legislation.
Simplification of the rules on distance selling
With effect from 1 January 2021 The rules governing distance sales (of goods) will also be simplified. In essence, this means that the existing thresholds will be abolished. The threshold of €10,000 specified above will therefore also apply to distance sales. Furthermore, the MOSS scheme will also apply to distance sales (but only for traders established within the EU). Supplies involving installation and assembly, as well as the supply of new means of transport, works of art and margin goods, fall outside the scope of the new rules on distance sales.
We’ve covered this before in our article Online shops pay VAT in the country where they are established.
Abolition of the import exemption
Another element of the proposals outlined in this article is the abolition of the VAT exemption for small consignments. At present, imports of goods from outside the EU are exempt from VAT if the value of those goods does not exceed €22. This exemption puts European businesses at a competitive disadvantage compared with suppliers based outside the EU. This disadvantage will not be removed until 1 January 2021. At the same time, there will be simplifications to the VAT payment process for distance sales within the EU following the import of goods.