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On 1st January 2015, new place of supply regulations came into force within the E.U. These regulations effect enterprises – including one-man businesses – whose business activity is the supply of telecommunication services, broadcasting services and electronically supplied services.
Council Implementing Regulation (EU) No 1042/2013 states that such services are taxable where the customer is established when supplied to a non-taxable person. Explanatory Notes and a Guide were also issued to make the provisions of the Regulation clearer to the businesses affected.
Through this Regulation the place of supply has been placed in the State where the customer is established and any business supplying telecommunication services, broadcasting services and electronically supplied services to non-taxable persons has to charge VAT in the client’s place of establishment. This, in effect, meant that such businesses had to register for VAT in each EU State where their clients were established and charge the VAT rate applicable in that State.
To eliminate the need to register for VAT in a number of EU States other than the State where the business is established, the Mini One Stop Shop (M.O.S.S.) came into force on 1 January 2015 and will allow taxable persons supplying telecommunication services, television and radio broadcasting services and electronically supplied services to non-taxable persons in Member States in which they do not have an establishment to account for the VAT due on those supplies via a web-portal in the Member State in which they are identified. Under this optional scheme, a taxable person which is registered for the Mini One Stop Shop in a Member State (the Member State of Identification) electronically submits quarterly Mini One Stop Shop VAT returns detailing supplies of telecommunications, broadcasting and electronically supplied services to non-taxable persons in other Member States (the Member State(s) of consumption), along with the VAT due. These returns, along with the VAT paid, are then transmitted by the Member State of Identification to the corresponding Member States of consumption via a secure communications network. The Mini One Stop Shop VAT returns are additional to the VAT returns a taxable person renders to its Member State under its domestic VAT obligations.
To be eligible to register for M.O.S.S. a business must have a valid VAT number, which, in practice, means that the business must be registered under Article 10 of the VAT Legislation, thus excluding all small enterprises that are registered under Article 11 (Exempt).
The results of this practice on a small enterprise are:-
These negative effects have been highlighted in the UK through a petition and newspaper articles with the result being that UK Legislation now accepts small enterprises to register for MOSS but not charge VAT on their domestic supplies.