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VAT MOSS: Will I be affected by the EU VAT changes? Here are the facts for designers and artists

Rob Carney | Dec. 1, 2014
With the new EU VAT regulations, designers and artist who sell digital products online are faced with a world of tax confusion and seemingly unnecessary bureaucracy. We cut through the red tape.

"The major oversight with this law is no thresholds are upheld," emphasises designer Chris Spooner — a creative who, as well as offering graphic design and illustration services, provides a membership service where designers can download templates, typefaces, textures, vectors and more. "If a single person from Bulgaria pays $7 for a one month membership on my website, according to this law I must register for VAT in Bulgaria and pay 1.12 in tax. Unless I learn Bulgarian and personally contact the authorities in ????? to register for tax, I must sign up for MOSS here in the UK."

He continues: "In order to use the MOSS scheme I must be VAT registered, despite being well below the UK threshold. That means I'd then need to submit quarterly returns and lose 20 per cent of my entire income in VAT, even from my design services that aren't targeted in this EU law. Oh, and don't forget that I must keep evidence of this person's address, bank location, IP address or land line telephone number for ten years, which drops me into the laws surrounding data protection for personally identifiable information."

And he's right. Under VAT MOSS, you have to determine the place of purchase by providing two of the following (and the below is directly from gov.uk):

The billing address of the customer

The Internet Protocol (IP) address of the device used by the customer

Location of the bank

The country code of SIM used by the customer

The location of the customer's fixed land line through which the service is supplied to him

Other commercially relevant information (for example product coding information which electronically links the sale to a particular jurisdiction)

To add to Spooner, you need to keep VAT MOSS records for 10 years from 31 December of the year during which the transaction was carried out. Of course, for those of us who use the likes of PayPal rather than a bespoke online shop, asking for customer details beyond the standard email address can become intrusive and could undoubtedly affect sales.

Also, the admin issue is massive one. If you're only making a few hundred pounds by selling your digital products every year, how much time can you allocate to filling in forms? And how much admin does it involve?

Well, you'll need to know the VAT rates that apply to your products in all the countries you sell to, so if someone from Finland — 21 per cent VAT — buys your downloadable product, what's the cost and how do you show this on your website? You also need to make sure your VAT invoices to customers in other countries comply to that country's regulations. VAT MOSS returns are due every quarter, and can't be paid by direct debit, so you need to keep track of that.

 

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