Digital services rendered to B2C customers in the EU are in principle taxable with VAT in the country where the customer resides. As such, each provider of digital services should collect and remit VAT in potentially 28 EU Member States. This results in significant red tape, for example filing VAT returns and complying with different VAT rules across potentially 28 different countries.
The so-called Mini One Stop Shop (MOSS) offers a solution aiming at less red tape. The MOSS provides for registration and filing of VAT returns in a single EU Member State via a single online portal. The Netherlands is often used as EU Member State of designation, given the smooth entry it into the MOSS and the cooperative nature of the Dutch tax authorities.
We assist many clients with implementing the EU VAT rules for B2C digital services. There are various important aspects to determine the VAT treatment of these digital services. These aspects for example include collecting and retaining objective proof to demonstrate in which country the customer lives, identifying the tax point date, invoice (language) requirements, currency, and applicable VAT rate. Although a single VAT return can be filed via the MOSS, the aforementioned aspects should typically be determined, monitored and managed on a country-by-country level, including settings and VAT logic in ERP systems.
Another important aspect is pricing. Given the deviating VAT rates across the EU, a pricing strategy should be developed. Businesses should for example consider whether they present prices including or excluding VAT. Working with prices including VAT will probably create a better customer experience across all platforms and countries, but will impact margin for countries where the VAT rate is relatively high compared to others.
Contact KPMG Meijburg & Co tax lawyers to discuss the impact of Indirect Tax in the Digital Economy (Max van de Ven (VandeVen.Max@kpmg.com / +31 88 909 25 75) or Andy van Esdonk (VanEsdonk.Andy@kpmg.com / + 31 88 909 15 96).