Handling VAT collection for digital businesses VAT collection for international on-line retail business

Handling VAT collection for digital businesses – under the new MOSS scheme from 01 January 2015

Handling VAT collection for digital businesses changed as of 01 January 2015.

As from the 01 January 2015 handling vat collection for digital businesses will change. The rules for taxing the supply of telecommunications, broadcasting and electronically supplied services to consumers (TBES) will change. The “place of supply” for VAT purposes used to be the jurisdiction in which the supplier business was established, usually resides or belongs. From tomorrow, VAT will now be due and collected on digital goods and services in the member state in which the consumer resides.

Handling VAT collection for digital businesses – What’s the problem

The problem is that if your business supplies digital services throughout the EU you will have to resister for VAT in all 27 member states. HM Revenue and Customs offer an alternative to this through the VAT Mini One Stop Shop.

Handling VAT collection for digital businesses – The VAT Mini One Stop Shop (MOSS)

There will be two separate MOSS schemes – 1. Union VAT MOSS scheme (this is for EU businesses); and 2. Non-Union VAT MOSS scheme (for non-EU businesses). All the business has to do is register under the appropriate scheme. You can’t use the scheme to avoid VAT registration in any jurisdiction in which your business is established. You must register by the 10th day of the month following your first digital services supply. There is no de minimis threshold for the scheme in other member states. Notwithstanding, you can only apply under the scheme in the UK if your turnover is above the UK registration threshold (currently £81,000), this raises a potential issue for small businesses.

For further information visit the HMRC website , or consult with an accountant.

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