VATMESS updated - but a new MESS to come?

Paul Soper
Accountant
Paul Soper
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Having been involved in the original VATMESS campaign and having written on it here, and elsewhere, I thought I'd update the current situation.  The ECOFIN, EU council of Finance Ministers have voted yes to basic demands of the VATMESS campaign - people who supply e-services which are downloaded for reward in other EU countries will no longer be obliged to register in each country or use the Mini One Stop Shop (MOSS) to account for EU VAT on their sales into the EU until the TOTAL value of those sales exceeds €10,000.  So a craft knitter selling on-line knitting patterns will no longer be breaking the law - good news indeed.  If sales exceed €10,000 a light touch will then be applied to mandatory record-keeping provided sales do not exceed €100,000 - also good news.  There is some bad news though - the new rules will be introduced no later than 1 January 2019 so for the next year small traders will still be vulnerable.

The MESS to come?  Part of the EU new VAT plan is to reform the rules for cross-border sales of goods, called distance selling in the single market rules.  At present if you sell goods to a consumer in another EU country you are not obliged to register in that country unless your turnover in that country exceeds €35,000 (and sales to Germany and the UK (if outside the UK) €100,000).  These sales are treated as domestic sales unless you exceed the limit.  The proposal here is that the current distance selling rules are scrapped - each country's Mini One Stop Shop will become a "One Stop Shop", all sales of goods above a de minimis limit will be deemed to take place where the customer is located and the various VAT liabilities returned through the OSS, or individual country registration.  Will there be a de minimis then?  No longer €35,000 into each country but €10,000 into ALL countries of the EU.  This will apply from 2021 onwards by which time we will have left the EU and in all probability will no longer benefit from even that de minimis limit!

HMRC seem to waking up to the fact that Brexit will affect taxation quite slowly, the budget included an indication that they were looking at the cash flow impact on importers who will no longer be able to simply account for VAT but actually pay it.  There are many more issues which Brexit will affect and this area of distance selling whether of goods or services (and now ALL services, not just e-services) is another.  Presumably we would have to join a Non-Union MOSS in another member state - I suppose Ireland has the advantage of using English... potentially MESSy indeed...

http://europa.eu/rapid/press-release_IP-17-4404_en.htm

 

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