The Vat E-commerce Package

A. INTRODUCTION

 

The VAT E-commerce Package adopted by the Council on the 5th of December 2017 includes several changes that will be gradually implemented, some changes will be effective as from the 1st of January 2019 and the rest as from the 1st of January 2021.

This update
refers to the changes that come into force as from the 1st of
January 2019 based on the EU Council Directive 2017/2455, EU Council Regulation
2017/2454 and EU Council Implementing Regulation 2017/2459, which are the
following:

1.     
The introduction of a threshold up to
which the place of supply of telecommunications, broadcasting and
electronically supplied services ('TBE services') is considered to be the place
where the supplier is situated.

One piece of evidence is sufficient
to determine the place of supply of transactions of the supplier with total
supplies below the threshold of EUR 100,000.

3.     
A supplier using the MOSS will only have
to respect the invoicing rules of the Member State in which he is identified
for the MOSS,

4.The Mini One Stop Shop (MOSS) Regime is broadened so as to enable Non-EU
suppliers supplying TBE services to individuals within EU, to use the Non-EU
MOSS scheme even if they are registered for VAT in the EU.

The purpose
of these changes is to reduce the burden for small and medium-sized companies (SMEs)
supplying such services to customers within EU both in terms of numerous
registrations and compliance with the reporting and invoicing rules of
different EU Member States (EUMS).

A.    
CURRENT PRACTICE

As
from 01.01.2015 until 31.12.2018, the place of supply of TBE services supplied
by a taxable person (the supplier) established in a Member State to a
non-taxable person (the customer) in another Member State was in the Member
State where the customer is established, has his permanent address or usually
resides.

Consequently,
a supplier of TBE services used to impose VAT to the customer at the applicable
VAT rate of the customer's Member State. In order for the supplier to be able
to declare and pay this VAT to the tax authorities in that Member State, he had
to:

1.     Either register
for VAT in each of the EUMS of the customers or

2.      Register for
the MOSS in his own Member State.

That
was very burdensome and costly for micro-businesses, which only occasionally
used to supply TBE services to customers in other EUMS.

1.   
Introduction of the EUR 10,000 threshold

As
from 01.01.2019, an annual EUR 10,000 turnover threshold is introduced, up to
which the place of supply of relevant supplies of cross-border TBE services
remains in the Member State where the supplier is established, has his
permanent address or usually resides.

The
application of this threshold is subject to the following conditions:

a) The
supplier is established, has his permanent address or usually resides in only
one Member State;

b) He supplies TBE services to
customers who are established, have their permanent address or usually reside
in another Member State;

c) The total
value of TBE services supplied to other EUMS does not exceed EUR 10,000
(exclusive of VAT) in the current and
in the preceding calendar year.

1.1 Option to apply the general place
of supply rule – taxation in the member state of the customer.

In case the
supplier wishes to apply the general place of supply rule (taxation in the
Member State of the customer), he can do so and will be bound by this decision for
two calendar years
. As soon as the threshold of EUR 10,000 is exceeded, the
general rule (Member State of the customer) applies without exception.

1.2 Persons already registered with
MOSS

A
taxable person who is already using the MOSS and whose total value of TBE
services in other EUMS is below or equal to the threshold can deregister from
MOSS as of 1 January 2019 (voluntary deregistration).

A
quarantine period of two calendar quarters will apply during which the taxable
person will not be able to register for MOSS.

2.      EUR 100,000 threshold – one piece of evidence

A
taxable person (the supplier) established in one Member State supplying TBE
services to a non-taxable person (the customer) in another Member State must,
for the majority of situations, keep two items of non-contradictory evidence to
identify the Member State of the customer, which is the Member State where the
supply is subject to VAT (the place of supply).

This
requirement is particularly onerous for SMEs supplying TBE services to
customers in other EUMS.

As
from 01.01.2019, one piece of evidence is sufficient to determine the place of
supply of transactions of the supplier with total supplies below the threshold
of EUR 100,000.

The
application of this threshold is subject to the following conditions:

1)       
The total value (exclusive of VAT) of TBE services provided by the
supplier from his business establishment or a fixed establishment located in a MS
to customers who are established, have their permanent address or usually
reside in other EUMS does not exceed EUR 100,000 or the equivalent in national
currency, in the current and in the preceding calendar year;

2)       
The item of evidence is provided by a person involved in the
supply of the services other than the supplier or the customer;

3)       
the item of evidence is listed below:

a)      Through his
fixed land line, it shall be presumed that the customer is established, has his
permanent address or usually resides at the place of installation of the fixed
land line;

b)      Through mobile
networks, it shall be presumed that the place where the customer is
established, has his permanent address or usually resides is the country
identified by the mobile country code of the SIM card used when receiving those
services;

c)      Services for which
the use of a decoder or similar device or a viewing card is needed and a fixed
land line is not used, it shall be presumed that the customer is established,
has his permanent address or usually resides at the place where that decoder or
similar device is located, or if that place is not known, at the place to which
the viewing card is sent with a view to being used there.

As
soon as the threshold is exceeded during a calendar year, the normal rules
apply, meaning that again two pieces of evidence are required.

3. Invoicing Rules

Invoices
for TBE services to non-taxable persons are to be issued according to the invoicing
rules of the MS where the supply is deemed to arise. For TBE services, this is
generally where the customer is situated unless, as from 01.01.2019 the
supplier has not exceeded the threshold of EUR 10,000 where the place of supply
is considered to be at the place where the supplier is situated.

A supplier
using the MOSS, as from 01.01.2019, will only have to respect the invoicing
rules of the Member State in which he is identified for the MOSS, instead of
the rules of each Member State where his customers are located.

4. Non-union MOSS Scheme –
eligibility

Up
until 31.12.2018, a taxable
person who was not established within the EU but who was registered or was
obliged to register for VAT purposes in one of the EUMS could not use the MOSS
(neither the non-Union scheme nor the Union scheme).

As
from 01.01.2019, such a taxable person will be allowed to use the Non-Union
scheme, which is the MOSS regime for taxable persons not established in the EU
supplying TBE services to customers in the EU.

D.
CONCLUSION

The new
simpler rules for businesses selling cross border services online introduced to
the EU VAT Law, are expected to reduce the burden for SMEs established in a
Member State supplying such services to customers in other EUMS.

With the
effected changes, it is easier for online businesses, especially SMEs to access
other markets and unlock e-commerce in Europe as less time, red tape procedures
and costs are now required.

E. HOW
KINANIS LLC CAN ASSIST

Kinanis LLC
is in a position to assist you with the provision of the following services:

·        
Ongoing
advice on the provisions of the Cyprus and EU VAT Law

·        
VAT
Registration and subsequent VAT reporting

·        
MOSS
registration and subsequent VAT reporting

·        
MOSS
Deregistration

·        
Assistance
in claiming back refundable input VAT

·        
VAT
deregistration

F.
DISCLAIMER

This
publication has been prepared as a general guide and for information purposes
only. It is not a substitution for professional advice. One must not rely on it
without receiving independent advice based on the particular facts of his/her
own case. No responsibility can be accepted by the authors or the publishers
for any loss occasioned by acting or refraining from acting on the basis of
this publication.

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