European Commission unveils VAT MOSS reforms
Two years of contention over the EU's VAT rules regarding the place of supply of digital services, an e-commerce reform targeting wealthy multinationals which instead devastated online SMEs and microbusinesses, came to an end on Thursday with the announcement of a programme of reforms and changes.
The reforms, part of a larger package of proposals made in support of the Digital Single Market strategy, are a direct response to two years of grassroots volunteer activity.
For campaigners, the key demand has been the establishment of a common-sense threshold before EU VAT rules would become applicable to cross-border sales. Thursday’s announcement confirmed that the European Commission is proposing a threshold of €10,000 in online sales per annum before MOSS rules would apply. Businesses trading under that threshold will be able to apply domestic VAT rules. In support of this proposal, the Commission revealed that just 0.1% of all MOSS revenue has come from returns with a declared turnover of under €10,000.
In addition to the €10k threshold, SMEs which make less than €100,000 in cross-border sales will no longer be required to provide two pieces of data to prove the place of supply of their customers. This requirement had resulted in businesses spending thousands of pounds to reprogram their e-commerce operations in order to collect trivial amounts of European VAT. The EC now says that one piece of evidence will suffice for traders of e-services.
“We are thrilled that the European Commission has adopted this ‘soft landing’ which we're confident will keep small businesses trading," said Clare Josa of the EU VAT Action campaign, the advocacy group whose tireless lobbying was formally cited by the EU in their impact assessment. “Whilst it would have been nicer if the threshold had been higher,” she adds, “we cannot afford to let it go any lower.”
Other changes pertain to the internal administrative burdens created by VATMOSS compliance. Under the reforms, small businesses will be allowed to use domestic VAT rules on invoicing requirements and record keeping. The bizarre requirement to keep all MOSS-related data for ten years will no longer apply.
In addition, the first point of contact for queries will always be the tax administration where the seller is located. Traders will no longer receive random demands from tax authorities in other countries, a complication which rather defeated the whole purpose of the MOSS system.
The returns process has also come in line for reform. In response to feedback that it is difficult for sellers to collect multiple points of international data within strict filing deadlines, the EC has proposed extending the deadline for MOSS returns from 20 to 30 days following the end of the tax period.
The Commission also wants sellers to be allowed to correct previous MOSS returns in a subsequent return, rather than having to file amended returns for previous quarters.
| MOSS by the numbers
Once accepted, the proposed thresholds and changes would take effect in 2018. Even so, Josa cautions that the work is not finished. "We need to keep getting MEPs to lobby member states' finance ministers to make sure this legislation passes without changes," she says, noting that it is critical for all issues to be resolved before the system rolls out to physical goods.
For now, says Josa, the proposed reforms are "testimony to what a group of businesses can do when they work for positive change. This simply would not have happened if there had not been thousands of business owners working together."