VATMOSS
This is the shorthand name for the operation of the cross border VAT rules for sales of electronic services to consumers across the EU.
The VAT rules were changed in 2015 to make the ‘place of supply’ for transactions the location of the customer, rather than the location of the trader. These changes were made to prevent the erosion of the VAT base by international companies booking their sales in low VAT jurisdictions.
The change included the concept of a "mini one stop shop" (MOSS) to simplify VAT reporting and payment. Using the MOSS, traders would be able to report and pay the VAT via their own country's VAT authority rather than having to register in every country in which they traded.
Microbusinesses
However, the changes entirely overlooked the existence of a whole class of microbusinesses. Perversely, the rules designed to prevent large platforms from gaming the system seemed likely to prevent small traders from trading on their own account rather than via a platform, because the administrative burden imposed by VATMOSS was disproportionate.
The core problem is that there is currently no de-minimis level of reporting for VATMOSS. In theory just one international transaction would bring a trader within the VATMOSS reporting regime, whether they were VAT-registered in their home country or not.
Rules relaxed
After a sustained campaign, the rules have been relaxed. The European Commission press release on 5 December confirms that the previously announced changes have been ratified by ECOFIN.
From 1 January 2019 there will be:
- €10,000 threshold below which the VATMOSS rules will not apply; and
- €10,001-€100,000 buffer zone where there will be "simpler procedures".
The first provision will mean that the very smallest UK start-ups and micro businesses will not be brought within the VAT rules at all (as the €10,000 limit is well below the current UK VAT registration threshold).
The "simpler rules" are in response to the concerns raised about the genuine impracticality of, for example, being able to obtain and retain two separate pieces of customer location data.
These changes represent a sensible way forward, which take account of the reality of the very smallest businesses, such as authors selling their own ebooks