VAT MOSS or VAT MESS?

VAT MOSS or VAT MESS?

As from 1 January 2015, businesses supplying digital services have been obliged to account for VAT in the country where the customer is located and not where the business is based.

The result? The various VAT rates of the EU's 28 member states now need to be applied as opposed to the simple one rate that was previously applied. The whole system has been flipped on its head.

It is proving to be pretty controversial.

'OK, this is a big change but it doesn't sound too complicated', I hear you say. Surely a company's accountant could get their head around the principles over a lunchtime sandwich from Pret?

Perhaps.

What's more, to avoid businesses having to account for, say, ‘Arvonlisävero’ or ‘Данък добавена стойност’ (ie Finnish or Bulgarian VAT) in languages where they may be a tad rusty, the government has set up a VAT 'Mini One Stop Shop'. This service, known as 'VAT MOSS', is designed to facilitate and streamline VAT payments to EU tax authorities.

So 'all' that needs to be done under the new regime is for businesses to:

  • charge VAT based on where the consumer is located
  • validate the consumer's location, and
  • report the VAT to each relevant EU state or, even better, let VAT MOSS do the 'dirty work' of contacting the various EU tax authorities for them.

It sounds so simple.

If only.

Whilst the new regime has been relatively benign for many larger retailers, micro-businesses in particular have been badly affected. A lot of them are angry and, to be fair, I don’t blame them:

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