EU to propose €100,000 VAT threshold for digital services MOSS

The European Commission is considering proposing a €100,000 VAT threshold on the 2015 EU VAT changes to digital services. This is in response to claims that the changes to the place of supply rules on e-services to consumers are severely hampering the development of digital micro businesses.

The proposal for a reporting threshold on sales across EU borders of digital services is expected to come from Andrus Ansip, the European Commission Vice-President for the Digital Single Market. It is in response to campaigning from the UK where a high VAT registration threshold has meant that micro businesses have been drawn into the EU VAT regime for the first time under the 2015 changes.

However it is far from certain that such a proposal would be carried. There are practical obstacles with a digital VAT threshold, principally because most other EU member states have much lower VAT registration thresholds.

The changes ushered in at the start of 2015 affect EU providers of cross-border supplies of broadcast, telecoms and electronic services including apps, streaming video and music, games, online membership fees and cloud-based accounting or data services. The new rules mean that suppliers of such services must charge the VAT rate of the country of their customer rather than their own country. The VAT charged and collected can then be paid in one, quarterly filing through new online portals, known as Mini One-Stop-Shop (MOSS).

The changes bring digital service into line with other services, which have used the destination principle since 2010.  Non-EU providers of digital services have been operating under the new rules since 2003.