Digital suppliers cautioned over EU VAT consultation

Digital services suppliers caught by the EU’s VAT rules should not get their hopes up that a new consultation to introduce a sales threshold is an instant fix, a lobbyist is cautioning.

Although considered to be a potential lifeline, any significant relief the threshold could bring such suppliers may be 18 months away at “very very best,” said the lobby group VAT Action.

“We still need vital interim suspension or some other easement to stop the ongoing damage being done to the grassroots digital economy,” the group said in a recent online update.

“This could come from Westminster – and…we know that it’s asking a lot [but]…please feel free to write more letters to your MPs and MEPs”.

The appeal reflects the fact that the necessary “interim relief could come from Brussels,” where the consultation has been opened, despite the process containing “deficiencies.”

“Payment providers don’t give the two pieces of non-contradictory information on the buyer’s location that we need,” added VAT Action, referring to requirements under the new rules.

“Even if we can get that data, we aren’t equipped to store sensitive data safely. [Also] there are 81 VAT rates across the 28 EU countries, which vary according to region and product, and there’s no central up-to-date source for these rates.”

Another big issue is that “automated digital service” – specified in the rules – is not clearly defined and the 28 countries affected can all interpret the guidelines differently, as to what is covered.

VAT rules for digital services suppliers changed on Jan 1st 2015, with the requirement that they must charge VAT at the rate of the EU country where their customers are located, not where they are based.