From the 1st of January 2015, new rules will be applied to the location of services carried out electronically to private individuals (non-taxable persons) established in the European Union. Therefore, the supply of all telecommunications, radio and television broadcasting services or electronic services (aka e-commerce) will be taxed at the place of consumption, meaning where the buyer is domiciled or has usual residence, the VAT rates in force in that Member State being applied.
Providers of electronic services to private individuals must therefore choose between:
- registering for VAT purposes in each of the countries where they provide their services;
- registering to use the online service of MOSS Mini-Balcão Único (in Portugal) or VAT Mini One Stop Shop (in Malta).
To use MOSS, taxable persons, established on not within national territory, who choose the regime, must present a single declaration each quarter and pay the VAT related to all telecommunications, radio and television broadcasting services or electronic services supplied to persons who are not taxable persons, established or domiciled in the Community. Later, the tax authority (TA) sends each Member State of consumption the details related to the services provided for each of them and the value of tax paid.
To date, the location of these types of services was based on the location rules for the provision of electronic services which fall under Directive no. 2002/38/CE, of the Council, from the 7th of May. This Directive stated that electronic service providers of other countries, when providing services to private individuals not subject to the payment of VAT in a community country, would have to register for VAT purposes in the respective countries or, alternatively, establish an activity in a Member State and from then on provide the given services, it being considered, in this case, that the services would be located in this Member State in accordance with the principle of origin applicable to the provision of services.
Note that, under the terms of the VAT Directive (current Directive 2006/112/CE, of the 28th of November) electronic services are those considered as being provided electronically, meaning those where both the order and delivery occur online, with the fact that the provider and buyer communicate via electronic mail not being sufficient for the service to be qualified as such. They are therefore digital or virtual goods, which, for VAT purposes, lose the corporate nature and so the related operation is no longer qualified as transmission to be treated as a provision of services, as stated in the definition expressed in article 24/1 of the VAT Directive. Attachment II of the Directive includes an indicative list of these services, but it must be noted that this list is merely exemplary.
In December 2007, the ECOFIN Council approved the so-called VAT Package which, among other issues, defines the location rules of electronic service operations which will be applied as of the 1st of January 2015 and which, as mentioned above, involve the taxation of these operations at the location of consumption, regardless of whether the buyer is subject to VAT or a private individual.
About Mini One Stop Shop
The Mini One Stop Shop – MOSS is a special regime aimed at facilitating the compliance with the obligations related to the provision of telecommunications, radio and television broadcasting services or electronic services to non-taxable persons who are established or domiciled in the Community.
This regime is optional and applies to taxable persons established in the Community but not in the Member State of consumption (EMC), and to taxable persons not established in the Community, as long as they provide telecommunications, broadcasting or television services or electronic services to non-taxable persons established or domiciled in the Community.
To be able to register in the regime, taxable persons established in national territory (member State of identification or EMI) meaning those that have a registered or stable establishment in that territory, use the tax number that they already have for the purposes of their respective activity. Non-resident taxable persons in the Community who choose the national territory as EMI must request a tax number from the Tax and Customs Authority for the purposes of registering in the regime.
In practice, taxable persons, established on not within national territory, who choose the regime, must present a single declaration each quarter and pay the VAT related to all telecommunications, radio and television broadcasting services or electronic services, supplied to non-taxable persons who are established or domiciled in the Community.
Later, the Tax Authority (TA) sends each Member State of consumption the details related to the services provided for each of them and the value of the tax paid.
The regime has two forms, the first designated as Union Regime, applicable when the service provider is a taxable person established in the Community, and the second designated as Extra-Union Regime, applicable when the service provider is a taxable person not established in the Community.
The Union Regime covers all services provided from the registered office or stable establishments to any other member State where the non-taxable buyer is established or domiciled (EMC). Services provided to a member State where the provider has a registered office or stable establishment are not covered.
The Extra-Union Regime covers all services provided in the Community by taxable persons not established in the Community, regardless of the Member State of consumption.
This regime is already operational in both Portugal and Malta. Further guidance and instructions can be obtained at:
NEWCO is fully available to provide additional clarification on this matter and support its clients in adhering to the MOSS regime in the relevant jurisdiction.