You may remember that, on April 7, 2016, the European Commission adopted an action plan (Towards a Single EU VAT Area) setting out urgent actions to tackle a number of important VAT issues. As part of this initiative, on December 1, 2016, the Commission announced that it proposes to expand the scope of the so-called ‘Mini One Stop Shop’ (MOSS) for the collection and EU-wide distribution of VAT on certain e-services, to include sales of online goods and other services. The Commission also expressed the hope that it could further facilitate e-commerce for both consumers and companies (especially start-ups and SMEs) by introducing a range of proposals.
The simple reason for all this feverish activity is that the current rules for digital commerce were created well before the advent of the Internet and the boom in online sales. EU law is now trying to catch up with market practice.
What is the European Commission Proposing?
In short, the proposals include:
The European Commission has identified and attempted to quantify the cost of three key problems that the proposals are intended to address. These are:
In addition, the Commission has responded to the invitation of the Finance Ministers of the Member States to permit members to tax traditional, hardcopy books and newspapers at the same rate as electronic publications. Print sources frequently attract reduced VAT rates (e.g. the UK and Ireland zero-rate such supplies, and many other Member States apply reduced and super-reduced rates), whereas e-books and online newspapers are taxed at standard rates. (See our blog post, European Commission Proposes Reduced VAT on E-books for more information.) Member States will now have the option to redress this anomaly.
When Might These Proposals Take Effect…
The proposal on leveling the playing field between e-publications and print sources can enter into force immediately on approval by the European Council.
The Commission suggests that the proposals on e-commerce thresholds will take effect in 2018, with the other proposals described in this blog coming into place in 2021.
…And Will They Work?
The European Commission suggests that trade between EU Member States will increase as a result of the simplifications and reduce cross-border VAT compliance costs. In addition, it is hoped that domestic online companies and traditional high street businesses will benefit because they will no longer be undercut by businesses charging lower VAT rates or no VAT at all.
Given the sensible nature of the proposals, this seems likely. Although the current workings of the MOSS have had a mixed reception, the simplification involving the EUR100,000 threshold goes some way to addressing the concerns that have been raised. In addition, it is also likely that the UK - post-Brexit - will continue to adopt the simplifications to avoid a VAT trade barrier with the EU.
By Jon Trevelyan, Editor, Bloomberg BNA
Access even more in-depth analysis and expertise with a free trial to the Premier International Tax Library.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)