VAT is in the news again for July 2014 as high tech firms bite the tax bullet. Skype has just become one of the first technology firms to change its pricing in anticipation of Britain’s new VAT rules, which have been designed especially to make tax avoidance much more difficult. And businesses all over the EU who provide digital services will be able to tap into a convenient one-stop VAT service from January 2015.
Skype plays fair
In contrast to some big businesses, who have done their level best to avoid paying UK taxes, Skype telecoms group, which is owned by Microsoft, has announced it won’t be charging customers a VAT supplement when they buy credit.
In January 2015 new EU rules come in which mean VAT has to be levied where the user of the service or goods is located instead of where the manufacturer or supplier is based. Right now British Skype customers pay VAT to Luxembourg, but not for much longer.
Under the current VAT system, British Skype users buy their credits from a Luxembourg-based division of the group, paying the country’s 15% VAT rate. From January 2015 they’ll pay €10 for ten Euros’ worth of Skype credit, a sum that includes UK VAT at 20%. Skype is making the move because it wants to be transparent, a refreshing change from the Starbucks of this world. It means the firm will either make less profit from UK users or will have to increase their call costs to make up the deficit.
One-stop VAT service for digital services suppliers
From January 2015 businesses supplying online broadcasting, telecoms and e-services like streaming, games, apps, dating services and online subscriptions to magazines and newspapers won’t have to pay VAT separately in every country where they sell their goods and services.
From the new year the place of supply and taxation for B2C digital services will be the end user’s location. This means that UK digital services suppliers don’t have to register separately for VAT in every EU country they sell their wares. Instead there’s a new, optional one-stop VAT service called VAT MOSS on the cards, and other EU states will be creating their own systems.
Anything that makes the VAT thing easier is helpful! But if you’re still lost in space with VAT and all its complexities or you’d like to talk through the changes, we can help.