At a seminar held by HM Revenue & Customs and the European Commission on 2 June 2014, tax officials discussed the upcoming 2015 VAT rule changes for B2C supplies of telecommunication, broadcasting, and electronic services.

Characterization of Suppliers and VAT Liability

Under the new rules, it is assumed that any participant in the supply chain of services is considered principal to the transactions, which can become especially complex for e-services. However, the assumption can be rebutted if a participant is not the party who authorizes the charge to the customer or controls delivery to the customer, and other certain conditions are met.

In general, it is expected that business will not get everything 100% correct and tax authorities will take a reasonable position as business become accustomed to the new rules. However, business need to begin evaluating their supply chains, contracts, agreements and potential VAT liabilities now, in order to prepare for the changes.

Place of Consumption

Currently, the location of the supplier determines the VAT liability. This approach provides significant competitive advantage for large suppliers located in low VAT countries, which is one of the main reasons for the creation of the new rules.

Under the new rules, it is the place of consumption that determines the VAT liability, and the supplier is responsible for determining where that place is. In determining the place of consumption, the basic approach is that the place is where the customer is located, such as their place of establishment, permanent address, or usual residence.

General presumptions include:

• For low-value services such as telephone booth or Internet cafe services, a de minimis rule applies and the customer is presumed to be in the location of the service provided
• Services provided over a fixed landline are presumed to be consumed in the location of the fixed line
• Mobile phone services are presumed to be consumed in the country in which the phone's SIM card was issued

When a general presumption cannot be applied, the supplier must obtain two pieces of non-contradictory evidence, such as:

• A billing addresses
• An internet protocol addresses
• The place of issuance of a credit card
• etc.

In general, tax authorities will accept the use of automated systems for determining place of consumption.

EU Mini One-Stop Shop

The EU Mini One-Stop Shop (MOSS) is intended to reduce the burden of complying with the new VAT rules by allowing a business registered in any EU Member State to report and pay VAT on telecommunication, broadcasting, and electronic services to all Member States. Businesses not established in the EU are allowed to register in the Member State of their choosing and make use of MOSS.

Each Member State will have its own MOSS portal in its own language. The portals are to include all current rates, but should allow for the manual input of older rates or newer rates as applicable. Most Member State portals will also allow users to override the automatic calculations if needed.

The portals will not include thresholds, such as those applied to distance selling. The main reason being that each Member State sets their own thresholds, and having 28 different thresholds in the MOSS system would unduly complicate the system. However, the issue may be revisited in the future.