Changes to VAT on Digital products… The simple version!
For those of you in the business of Digital products and services its important that you are aware of the VAT changes coming into effect next year… its sounds far away, but its not! Some of you may already be receiving emails from the likes of Google apps and Skype and so on. Before you ignore them, at least find out the basics as it may be something you need to act on.
In very basic form: From 1st January 2015 VAT should be charged at the consumer’s VAT rate for EU cross state supplies of digital services. This is probably best illustrated with an example:
If a UK VAT registered business supplies a digital service/product to a consumer in Spain then the Spanish rate of VAT (or equivalent) is applied. In this case 21%. Note this is just business to consumer (B2C) supplies and not Business to business (B2B).
If you’re a UK based business making B2C digital supplies to EU consumers, you can choose to use HMRC’s union VAT MOSS online service. You must then use the scheme to account for VAT on all of your B2C digital supplies to consumers in member states where you’re not established.