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Place of supply VAT rule changes

From 1st January 2015, if you are involved in the supply of digital services (electronically supplied services) you should be prepared for a major change to the VAT place of supply rules.

If your customers are private individuals in other EU member states, you will be required to account for VAT on these supplies in the Member state where the customer is established.

To determine whether your business will be affected by these changes it will be important to undertake a review of the services being provided and examine the following issues:

• Pricing structure – to take into account different VAT rates in Member states
• Establish where your customers are actually located
• Establish your customers’ tax status – e.g. are they private individuals
• Develop your internal accounting systems to cope with multiple VAT rates
• Storage and retention of customer data
• IT systems
• Budgets

Ad Valorem Tax Consultants can assist in this process by producing a plan to ensure your business is VAT compliant, conduct a review of your EU trade to establish where registration may be required and review your accounting systems to ensure that non UK VAT can be accounted for correctly through the EU ‘One Stop Shop’ (local country web portal registration).

There is however a significant positive element to these changes if you supply private individuals outside of the EU.

Under these new rules, EU suppliers are no longer obliged to levy VAT when selling on markets outside the EU, thereby removing a significant competitive handicap. Under tax rules previously drawn, EU suppliers had to charge VAT when supplying digital products even in countries outside the EU.

The changes eliminate an existing competitive distortion by obliging non-EU suppliers to charge VAT as if EU suppliers when they are providing electronic services to EU non-taxable persons, something which EU businesses had been actively seeking for some time.

If you require advice or assistance on any VAT matter please contact Richard Feakins on 01908 219100.

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Posted in: VAT