From 1st January 2015 VAT rules are changing for the supply of Digital Services to the public.
Digital Services has been defined as covering but not being restricted to Broadcasting, Telecommunications & E-services; specifically including:
- Supply of TV or radio programs.
- Sending or receiving signals by wire, radio, optical or other systems.
- Apps or any digital downloads (music, e-books, videos on demand etc.).
- Automated learning or examinations with no human involvement.
- Anti-virus software.
- On-line auctions.
These exclude distance learning, webinars, remote tutoring or examination services including human involvement.
Until now you have had to charge UK VAT when selling downloads to the public, throughout the EU. From the 1st January 2015 you will have to charge VAT or the EU equivalent depending on the member state in which your customer resides.
So firstly your systems will have to collect this data and produce the correct paperwork/reports.
Secondly you will need to account for this foreign VAT or equivalent. The easiest way is to register for the new MOSS VAT Scheme and hence prepare one MOSS VAT return to the UK authorities for all this foreign VAT rather than one return per country.
MOSS registration is now open or you can ask to add this service to your existing online VAT account.
For more details visit www.gov.uk/register-and-use-the-vat-mini-one-stop-shop
This is a change for sales to the general public, not a change for sales to business customers who are still subject to reverse accounting i.e. quote their VAT number on your invoice to them and do not charge VAT.
Locating your customer may be an issue; in general this will be the home location of the download device but when using an online portal, gateway or marketplace then check if you are selling direct to the customer or to an intermediary business as operator or agent etc. when business rules apply.
This is not a change to your usual VAT returns which are still required to report UK VAT.
The MOSS return is an extra optional return scheme to report foreign VAT. If you have registered for MOSS then a return and payment will be due every calendar quarter. If you deregister then you cannot reregister within 6 months.
If you are not yet VAT registered but sell Electronic Downloads in the EU, then you will probably have to register in at least one EU country as most EU countries registration thresholds for non-residents is nil turnover. Registration in the UK avoids multi country registration by using the MOSS scheme but will mean that all your UK & EU sales are now VATable. The solutions then are to stop selling in those countries or to use an intermediary business so you are not selling direct to the public.