New EU legislation is set to complicate VAT accounting for resellers and other technology providers, accountants have warned.
Thames Valley-based accountancy firm James Cowper warned today that the new "place of supply" rules, due to come into force 1 January 2015, will create "a major accounting headache" for companies across the EU, including the UK.
As reported on ChannelWeb previously, businesses that create and sell mobile applications to consumers, such as video downloads or e-books, will from that date have to charge VAT according to where the purchaser is located.
Ruth Corkin, VAT senior manager at James Cowper, said her clients include a number of fast-growing technology and app businesses.
"A UK business could quite easily find itself selling an app to a consumer in Luxembourg, having to charge just 15 per cent, and to a consumer in Hungary, with a rate of 27 per cent," Corkin explained.
"There are 28 countries in the EU with 30 different VAT rates; this creates a high administrative burden, plus enormous potential for mistakes."
Corkin noted that the rules are further complicated depending on the platform from which individual apps are sold.
"Apple's App Store, for example, is considered a marketplace, with purchasers buying directly from Apple and Apple automatically accounting for the VAT, whereas Google Play acts as an agent taking a commission on sales, leaving the retailer having to account for the VAT itself," she said.
She emphasised that a business selling the same app from Apple's App Store as well as Google Play, for example, will have to account for VAT in completely different ways.
The UK government's recently announced Mini One-Stop Shop (MOSS) initiative is meant to provide a simpler way of managing the issue. Those participating in MOSS will submit a separate VAT return, and pay it, at the end of each calendar quarter.
According to James Cowper, the return will have to record the value of products sold to consumers by member state and the amount of VAT due on those supplies at the local VAT rate. In the UK, MOSS returns will be submitted on the usual VAT online return portal – if suppliers are already VAT-registered.
"If the business is not already registered and provides these services to consumers in other member states, they will be required to register if they wish to use the MOSS. If they do not, they face the possibility of having to register for VAT in every EU country where a sale is made," Corkin said.
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