The mini one-stop shop (MOSS) is an ambitious project designed to facilitate cross-border trade. MOSS is optional. Economic operators can have multiple registrations if it suits them – and it may. MOSS offers the opportunity to avoid multiple registrations. MOSS may be used for telecommunication supplies, broadcasting services and electronically supplied services. There is no threshold for supplies. MOSS applies to B2C supplies. Initial investment into setting up systems and getting to grips with MOSS may pay off in the long run.
The mini one-stop shop (MOSS) is an ambitious project designed to facilitate cross-border trade. The project is to be tested on digital supplies first (see below). Eventually, it may be extended to the supplies of goods and services. Appropriately for digital supplies, it will make use of electronic systems for VAT administration.
The overarching feature of the MOSS is that economic operators can administer VAT through a single VAT registration, rather than multiple VAT registrations, even where they make supplies in a number of EU member states.
The infrastructure for the MOSS is in place or is being put in place. It consists of EU legislation, domestic legislation and guidance issued by the European Commission as well as domestic tax authorities, such as HMRC. MOSS registrations can start to be made from 1 October. They will become live with effect from 1 January 2015, as VAT on supplies on or after that date can be accounted for through MOSS.
MOSS is optional. Economic operators can have multiple registrations if it suits them – and it may. Operators with fixed establishments (FE) cannot use MOSS in member states where they have fixed establishments. They can only use MOSS for supplies made in member states where they have no FE. Those with existing systems to manage multiple registrations may derive little benefit from MOSS. In essence, the first key question for operators will be whether to use MOSS or not?
Member states are setting up VAT portals for accounting for VAT. Input tax cannot be claimed through MOSS. However, the existing VAT refund portals set up by member states can be used for managing input tax claims.
With effect from 1 January 2015, cross-border supplies of digital services will take place where the customer belongs, and not where supplier is established or has an FE. Domestic supplies in any member state where the supplier has an establishment or FE will not be affected; MOSS cannot be used for those supplies. VAT (with input set off) must be accounted for through the VAT registration for the establishment of FE in the normal way. MOSS can be used for digital supplies in member states where the supplier does not have an establishment or FE.
The change in the place of supply applies to business to final consumer (B2C) supplies, and not to business to business supplies (B2B). The B2B supplies already take place where the business customer is established; and that customer has to account for VAT through the reverse charge.
A purpose of the change is to create a level playing field for businesses, by removing the incentive to establish outside the EU for making supplies into the EU or to establish in a member state offering a favourable VAT rate. Luxembourg is most likely to be adversely affected by changes in the place of supply rules.
The change in the place of supply of digital services means that the VAT rate of the member states of consumption (MSC) or of destination will apply. VAT must be accounted for in the MSC (see below for registration), which will necessitate multiple registrations. MOSS offers the opportunity to avoid multiple registrations.
MOSS may be used for supplies of telecommunication supplies, broadcasting services and electronically supplied services (collectively referred to as digital supplies). Distance sales, for example goods ordered on the internet, are not electronically supplied services; nor is, for example, advice communicated by email.
The supply of telecommunication supplies, broadcasting services and electronic services are each defined; and each definition is accompanied by non-exhaustive lists of examples of services which are included in the definition, and others which are not. The definition of telecommunication services in the Principal VAT Directive (PVD) article 24(2) remains unaltered, but a list of examples which are included and excluded appears in a new article 6a(2) of the Implementing Regulation 282/2011 (IR), amended by Regulation 1042/2013. The definition of broadcasting services is new (IR article 6b). The central feature of broadcasting services is that it covers audio and audiovisual content provided to the general public via communication networks by and under the editorial responsibility of a media services provider.
The definition of electronically supplied services (e-services) in IR article 7 has been amended. The changes to that definition seek to align it with the definitions and lists provided for telecommunication and broadcasting services. Supplies which do not fall within those definitions may come within the definition of e-services. The core definition of e-services remains that of services which ‘include services which are delivered over the internet or an electronic network and involving minimal human intervention, and impossible to ensure in the absence of information technology’.
Digital supplies of even €1, made in a member state where an economic operator does not have an establishment, trigger registration obligations which can be managed through a single MOSS registration. There is no threshold for supplies which must be made to trigger registration obligations, essentially because member states could not agree upon de minimis threshold which could apply. Entitlement to any threshold provided by member states under the PVD rests on the economic operator having an establishment in that member state.
This carries important consequences. An SME established in the UK making digital supplies in the UK below the threshold (say, £50,000) is not obliged to register in the UK. If it also makes digital supplies of say, £20,000 each in France and Germany after 1 January 2015, it becomes registrable in both countries. If the SME wishes to use MOSS, the MOSS registration must be in the UK (see below); and it must also register for VAT in the UK and account for VAT on its UK supplies. In such a situation, the SME, in order to maintain its UK supplies VAT free, should consider registrations in France and Germany.
There are two MOSS schemes, namely a Union scheme and a non-Union scheme. The Union scheme applies to businesses established in the EU. Any MOSS registration under the Union scheme must be in the place with the establishment or fixed establishment; and if there is more than one, the business can select the country of registration. The non-Union scheme applies to non-EU businesses without any establishment or fixed establishment in the EU. The non-EU business can choose which country in which to register for the non-Union scheme. The place of the MOSS registration is referred to as the member state of identification (MSI).
MOSS enables a VAT return to be filed in the MSI, with a separate page for each MSC and a single payment of the total output VAT due. The tax authority in the MSI distributes the returns and payments to the MSCs. However, any supplies through an establishment or FE must continue to be accounted for in the normal way, thereby requiring multiple returns. VAT groups can use MOSS.
Only output tax is accounted for on a MOSS return, so it can never be a negative or repayment return. Any corrections must be made through the original return and not a later return. Input tax must be claimed separately.
Failures to file returns or make payments due can lead to the loss of right to use MOSS. Any penalties remain in the competence of the MSC, and not the MSI. The EC’s audit guidance states that initial contact with a taxpayer would be made through the MSI. Communications would be by email. If information needs to be exchanged between the business and the MSC, the method of exchange can be agreed with the MSC. The UK has agreed to follow that guidance.
It should be noted that MOSS records must be kept for ten years.
Long supply chains stretching across borders and involving intermediaries give rise to the question of who is the supplier that must account for VAT? E-services supplied through a telecommunications network, an interface or portal, such as a marketplace for applications (such as an app store), create a rebuttable presumption that the intermediary is the supplier unless there is an explicit indication of who the supplier is (IR article 9a). Rebuttal of the presumption requires that each invoice issued in the supply chain and the bill or receipt issued to the final consumer must identify the e-services and the supplier. Chapter 3 of the explanatory notes issued by the EC gives detailed examples concerning these rules.
MOSS applies to B2C supplies. Where a business customer does not supply a VAT number, or contrary information indicates that the supply is not B2B, the supplier, who takes the VAT accounting risk, can presume the supply is B2C and charge VAT. The customer (including a business customer) cannot recover the VAT as input tax, given the presumption. There is scope for disputes between suppliers and ‘business’ customers, but they must be resolved between the parties, not through the tax authority and normal refund procedure. As such, MOSS is not irrelevant to B2B supplies.
Establishing the customer’s location for digital services perhaps creates the greatest risk for suppliers. The scheme therefore applies rebuttable presumptions for the suppliers’ administrative convenience. Only the supplier or the tax authority can rebut the presumption. The supplier is not obliged to rebut a presumption, as it may involve risks to the supplier.
The table opposite outlines the presumed locations of customers of digital supplies (IR articles 24a and 24b). They are presumed to be the place where the customer is established or has his permanent address or usually resides.
Three items of non-contradictory prescribed evidence are required to rebut a presumption. The non-contradictory items of evidence may be any of the following, namely:
Much work has gone into creating a workable infrastructure. It will inevitably involve risks and uncertainty, at least in the early days of its operation. Many businesses will need to adapt their systems. Initial investment into setting up systems and getting to grips with MOSS may pay off in the long run. Unsure and, indeed, all businesses should undertake a cost-benefit analysis to assess whether there is merit in taking up the MOSS option.
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