RSM Malta

A ‘Digital Single Market Strategy for Europe’

A ‘Digital Single Market Strategy for Europe’ was announced today by the European Commission.

The Commission announced that it will be making legislative proposals in 2016 with the aim of reducing the administrative burden on businesses arising from the different VAT regimes. The proposed changes are as follows:

(i) Extending the current single electronic registration (MOSS registration) and payment mechanism to intra-EU and 3rd country online sales of tangible goods,

(ii) Introducing a common EU-wide simplification measure (VAT threshold) to help small start-up e-commerce businesses,

(iii) Allowing for home country controls including a single audit of cross-border businesses for VAT purposes; and

(iv) Removing the VAT exemption for the importation of small consignments from suppliers in third countries.’

Of particular interest is the proposed additions to the use of the VAT MOSS (Mini One Stop Shop) which concerns reducing VAT related burdens and obstacles when selling across border.

The complications of having to deal with many different national systems represent a real obstacle for companies trying to trade cross-border both on and offline. Since 1 January 2015, with the entry into force of the new “place of supply” rules VAT on all telecommunications, broadcasting and electronic services is applicable based on where the customer is located or resides, rather than where the supplier is located.

In parallel, an electronic registration and payment system has been implemented to reduce the costs and administrative burdens for businesses concerned. The EU Commission is proposing to extend this service to tangible goods ordered online both within and outside the EU. Instead of having to declare and pay VAT to each individual Member State where their customers are based, businesses would be able to make a single declaration and payment in their own Member State.

Currently goods ordered online from third country suppliers can benefit from the small consignment import exemption allowing shipments free of VAT to be made to EU private customers. This gives non-EU based suppliers a competitive advantage over EU suppliers and market distortions have already been noted in various Member States. Such an exception would no longer be needed if VAT were to be collected through a single and simplified electronic registration and payment mechanism.

Through these initiatives the Commission is working to minimise burdens attached to cross-border e-commerce arising from different VAT regimes, provide a level playing field for EU business and to ensure that VAT revenues accrue to the Member State of the consumer. The Commission will also explore how to address the tax treatment of certain e-services, such as digital books and online publications, in the context of the general VAT reform.