VAT Guides Compliance & Technical

VAT Rules for Suppliers of Digital Services to Consumers in the EU

VAT Rules for Suppliers of Digital Services to Consumers in the EU



When supplying digital services to businesses all over the word, it is important to familiarise yourself with the tax rules in regions you are offering services to. When providing digital services to consumers in the European Union in particular, it is important to consider their regulations around VAT, to ensure your business remains sustainable and compliant at all times. Depending on your established place of supply, the rules are a little bit different, which we’ll briefly explore in this article today.

VAT Rules For Businesses Established in the UK

When trading digital services to consumers in the EU as a business established in the UK, the following checklist containing a few important rules have been set out by the government to make it easier to maintain your compliance:

  1. Ensure you check individual rules in the place of supply first, to see if you are subject to any VAT or other tax.
  2. Check whether you are supplying a digital service or not. If not, the general place of supply service rules still remain. If so, the next step on the list becomes important.
  3. As of January 2019, the threshold for digital supplies is £8,818 (pre-VAT). If the annual total of services offered is below the threshold, the place of supply is in the UK. If it is over, the place of supply is where the consumer is located.
  4. It matters whether your customer is a business or a private consumer.
  5. If the supply is not made in the UK, find out whether it should be taxed at the EU member state standard or a reduced VAT rate.



VAT Rules for Businesses Established Outside the UK

If your business is based outside of the EU, the place of supply will be solely the location of the consumer. In this case, you will have to register for VAT MOSS (VAT Mini One Stop Shop) in an EU member state. It is important to register each individual state where your consumers are located. The digital services threshold mentioned earlier does not apply in this instance, and you will be responsible for accounting for VAT supply irrespective of the overall value of your sales in a given financial year.

Stay Up To Date With Brexit

Brexit, which refers to Britain’s plans to move away from the European Union, is still a hot topic in the news as we approach the end of 2019. If you are supplying digital services to consumers in the UK or in the rest of the EU, it is a good idea to stay up to date with the news around this, as looming changes may affect businesses, especially once the process has reached its conclusion. If you are offering services there may be policy changes coming into effect as a result of Brexit, which could have tax implications as well. Don’t take any chances, and get some expert advice if you’re worried about any potential effects on your business as a result of the process. 

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While this article aims to provide an overview of the technicalities around VAT, it should not be considered a legal authority on the matter. You are encouraged to talk to a specialist if you need more information, or if you have specific questions about the processes mentioned.

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