A combination of WordPress stats and my spider sense tells me that a lot of my readers probably work offering digital services. If this is the case for you, listen up – the laws are about to change for any trading you do within Europe.
Time was, when trading digital services with other Europeans (say, for example, you are a freelancer in Spain selling eBooks in France), you didn’t have to charge VAT. All that’s about to change.
As of 01/01/2015, new regulation dictates that digital service providers now have to charge VAT at the rate of the country they’re selling to. In the example above, you’d have to charge 20% VAT, as this reflects current French levels. Note that this only applies to B2C models – if you’re selling to businesses, tax is payable in their country and not yours.
How do I declare VAT for digital services in Spain?
- First of all, you need to sign up to the MOSS (Mini One-Stop Shop, or “Mini Ventanilla Única”). You do this by filling in the Formulario 034.
- Secondly, when the moment to pay in tax comes (at the beginning of April, July, October and January), you’ll need to fill in a special VAT declaration form. As of date of writing, this is still being finalised, but according to the Hacienda it will “probably” be Modelo 368. They have “reassured” me that they believe this will be approved before it is due in the beginning of April.
Am I selling a Digital Service?
The UK Government gives the most sensible answer to this:
‘Digital services’ includes:
- Broadcasting – the supply of television or radio programs
- Telecommunications – fixed and mobile telephony, fax and connection to the internet
- E-services – video on demand, downloaded applications (or ‘apps’), music downloads, gaming, e-books, anti-virus software and online auctions
This is a fast-changing area. These are examples rather than a complete list of digital services.
(i.e. no-one really knows)
Why were this laws introduced?
Reading between the lines, the news laws were introduced to stop e-commerce tax evaders creating a base in low-VAT countries such as Luxembourg and operating from there. Arguably, introducing the new rules means all suppliers are on a level playing field, and that you can’t be undercut when supplying to your own country by someone from outside the EU who doesn’t have to charge VAT.
As well as worrying that they’ll make their business less competitive than before, those against the new laws mainly point to the administrative headache they’ll create. In response to the question “Will the taxation of e-commerce supplies not give rise to administrative red tape”, the European Union replies with a definite “No.” We’re not so sure…
Text and photos by Penelope