VAT MOSS return: five not-so-obvious requirements
For many eService businesses the VAT Mini One-Stop Shop (MOSS) system is the first time that they will have to file a VAT return, let alone a VAT MOSS return.
VAT MOSS (Mini One-Stop Shop) returns are due within 20 days of the end of each calendar quarter. The returns require attention to detail, especially for those with sales across the EU, as technical requirements differ between EU Member States.
Businesses registered with the EU’s VAT MOSS system are always allowed 20 days from the end of each calendar quarter to submit their VAT MOSS return to their chosen Member State of Identification (MSI).
The MSI is the EU tax authority with which a merchant registers with for the purposes of declaring all of the VAT collected on their pan-EU supplies. For UK businesses this will typically be HMRC. Non-EU businesses have the option to register with any EU tax authority.
The MSI receives the VAT MOSS reports from all of its registered businesses and then distributes the relevant tax due to other EU tax authorities. For example, if a UK-based merchant registered with HMRC also supplies consumers in France and Germany then HMRC will distribute the tax due to the French and German tax authorities from the information contained in the VAT MOSS report.
That’s the straightforward part. There’s a report to be submitted and we know the deadline date – but what about the nitty-gritty?
Here at Taxamo we have been in constant communication with tax authorities across the EU ahead of the first VAT MOSS report deadline (here’s our country-by-country guide. We have established that the information businesses need to file as part of the VAT MOSS return will be slightly different depending on what country you are filing in.
Here we highlight five of the less well-known requirements of the VAT MOSS return:
1. Rounding up, down, or somewhere in between
The VAT MOSS report needs to show how much VAT a merchant needs to remit to a particular EU tax authority. But how is this VAT calculated prior to the submission of the report? Well, the answer varies depending on which EU tax jurisdiction the merchant has chosen as their MSI.
Different countries have different approaches to calculating how a return should be calculated. This mainly relates to countries having different rounding policies and taking alternative approaches to what base transaction value one should take when calculating the amount of VAT owed.
From the feedback Taxamo has received, EU tax authorities differ on the basis on which VAT returns are calculated and the rounding requirement of the VAT MOSS return. For example, the UK requires rounding to the nearest even pence while Ireland requires rounding down from the half cent.
Let’s take a VAT amount of £/€0.975
In the UK this is rounded to £0.98 while in Ireland it is rounded to €0.97.
This is a small but not insignificant difference and it is replicated throughout the EU. There are three options for rounding: round up, round down, or round to the nearest even pence/cent.
2. True to form – differing file formats required
From Taxamo’s discussions with the EU tax authorities we have identified six acceptable file formats that vary from Member State to Member State. The accepted file formats include:
- Libre Office
- XBRL, a variant of .xml.
It may not come as a surprise to learn that there is no ‘standard’ VAT MOSS return, each EU tax authority requires specific information relevant to its own domestic VAT regulations. HMRC, for example, require their returns in Excel or Libre Office and does not yet support automatic upload; Ireland requires XML file returns, and Germany requires CSV file returns. In some EU Member States there is also the option to manually input the data via the tax authority’s website.
For more generic information check out the European Commission’s own guide here.
3. Nothing standard about VAT rates
A key point. The whole reasoning behind the new EU VAT rules on the supply of digital services is that the correct VAT rate be applied. This VAT rate must be the one where the service is deemed to be consumed. Previously, the VAT on eServices was collected based on the supplier’s location.
However, it’s not just the standard VAT rates that businesses need to be concerned with. Certain EU Member States also apply ‘reduced’ rates on certain supplies.
This is an area of taxation that is changing rapidly, especially given a recent European Court of Justice ruling on the use of reduced rates by Luxembourg and France on eBooks. The ECJ ruled that the reduced rates on eBooks were illegal. Luxembourg and France have since started the process of altering how they tax the supply of eBooks.
4. A sea of currencies for the VAT MOSS return
The 2015 EU VAT Directive requires that the VAT MOSS return be in Euro (€), unless a merchant’s chosen VAT MOSS tax authority uses a different currency. For example, if a merchant uses the UK VAT MOSS system then the return should be in Sterling (£).
Keep in mind that for non-Euro returns, the exchange rate that must be used is the European Central Bank (ECB) rate applicable on the last day of the calendar quarter to which the return relates. For example, for Q2 returns it is the ECB exchange rate on Tuesday, June 30.
In addition, it is this ECB exchange rate that must be applied where any future changes (refunds, correction of errors) are made to the original MOSS return. Changes can be made to a VAT MOSS return up to three years and 20 days after the end of the relevant quarter.
For more information on this point, try the European Commission’s guidance on here (part two, section 13).
5. No sales this quarter – what then?
There is a requirement to complete a ‘nil’ return even if the merchant has no sales for a given quarter. The ‘nil’ return is required if the merchant has registered and wishes to remain part of the MOSS system.
No supplies in a given quarter will equal this ‘nil’ return. The merchant has to make this return so that their chosen MSI tax authority knows they are still intending to supply B2C digital services cross-border in the future.
If a merchant decides they want to leave the MOSS system then they must inform their MSI at least 15 days before the end of the calendar quarter before that in which it intends to cease using MOSS.
For example, if a merchant wants to leave the MOSS system from July 1 (end of Q2) in a particular year, then it must inform its MSI before June 15.
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