Rules around the European Union VAT place of supply service has changed from 1 January 2015. These changes affect the sales of digital services (broadcasting, telecommunications and e-services) from a business to a consumer (private individuals and non-business entities eg, public authorities or charitable bodies).
The place of taxation will be determined by the location of the consumer.
Digital services that are supplied on a business to consumer basis, the supplier is responsible for accounting for VAT on the supply:
- to the tax authority
- at the VAT rate applicable
in the consumer’s EU member state.
The new changes will create a level playing field for UK businesses by removing the current competitive advantage of EU member states with lower rates of VAT.
The new rules only apply where a UK business meets all of the following criteria:
- supplies digital services from the UK to another EU member state (goods and non-digital services sold over the internet are not within scope)
- supplies those services to a private consumer in another EU member state
- charges for that supply (digital services provided free of charge are outside the scope of VAT)
Businesses that are not affected needn’t take any further action.