What Is Happening With Physical Goods & EU VAT / VATMOSS in 2016? 2

Is VATMOSS going to be extended to physical goods on January 1st 2016?

Will it be applied to digital sales that have human intervention?

There have been a lot of rumours going around recently and most of them are based on ‘what if’ scenarios, rather than hard data. Separate the facts from the fiction, based on our recent meetings with the EU Commission, attending the EU Finance Minister Fiscalis Summit in Dublin in September, Cabinet-Minister-level meetings with HM Treasury in the UK and our Consultative Status with HMRC.

Quick summary:

  • VATMOSS does NOT come into force for physical goods on Jan 1st 2016
  • BUT legislation WILL be proposed next year that will include proposals for:
    • The removal of the Distance Selling Thresholds
    • The removal of Small Value Consignment Relief
    • The extension of VATMOSS to physical goods, so that you don’t have to register for VAT in 27 countries just to sell a widget or three
  • A threshold for this year’s Digital VAT changes, below which your home country VAT rules will apply
  • A threshold above that level with a simplified version of the rules for Digital VAT

If you have strong views on these measures, please start talking to your MPs / MEPs / Tax Authority NOW, so that they can make sure the legislation is well-drafted. It will still take a couple of years to negotiate and implement, so we’re at least 2-3 years away, but we have seen the mess that was accidentally made with digital VAT. You need to be acting on this one already.

And if you’re a member of an industry representative body or a regulatory body, please get them involved, too. Although your voice counts, they will have fast-track access to the decision-makers and it’s often the best way to make your voice heard.

Interim Threshold For Digital VAT

This is urgently needed. Whilst getting the threshold legislation proposed is a huge achievement, any permanent threshold is unlikely to come into effect before 2019 / 2020. So you need to keep hassling your MPs & MEPs to tell your FINANCE MINISTER to lobby ECOFIN to bring in an interim threshold, while these laws are passed. (They will understand what all of that means! If you’re not sure, here’s a video that explains it).

We are asking for €20,000 of cross-border, digital sales as the first threshold, and €100,000 of cross-border digital sales for the ‘soft landing’ zone.

The Good News

The European Commission and HM Treasury (UK) have confirmed that the selling of digital services with a strong human intervention component will remain under domestic Place Of Supply rules. So live webinars, courses with integral live components and other high-human-intervention components will continue to be liable for VAT based on the business’s location, rather than the customer’s. This is great news for those selling those products. However, we need to keep in touch with our government representatives to make sure this doesn’t get lost during the negotiations!

Please let us know via the comments how these changes might affect you and, if they do, what you will be doing to help make sure our governments don’t mess up with physical goods!

x Clare & the EUVAT Action Team

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2 thoughts on “What Is Happening With Physical Goods & EU VAT / VATMOSS in 2016?

  • Rajesh

    VATMOSS system on physical goods and removal of the relief would surely put a lot of burden on states. As detailed in your video, it would need to be agreed by all member states, do you think this may be agreed? Surely it will put more strain on some states then others.

    • Clare Josa, Mentor To Passionate World-Changers Post author

      Hi Rajesh,
      Great question.
      Opening up the VATMOSS reporting system for physical goods would really help businesses, because they would no longer have to register for VAT in each EU member state.

      However, the removal of distance selling thresholds and small value consignment relief would really hurt the smallest businesses and could grind their international trade to a halt.

      Is it likely? It depends what it is ‘bundled’ with in the legislative proposal. The view at the September 2015 Fiscalis summit was pro the removal of these limits. The primary reason for suggestions to remove small value consignment relief is how heavily it is abused by non-EU countries who use it to avoid paying duty. With the distance selling thresholds, EU Members States with no domestic VAT threshold feel these disadvantage their local businesses, for exports.

      If the UK now leaves the EU, that’s one fewer voice to argue to keep the thresholds and it makes it more likely (IMHO) that these changes would come in.

      But, as you say, all Member States would need to agree it. If they think it will bring them more tax revenue, then they will. Clare