November 10, 2020
As of 1 January 2021, suppliers of digital goods and services based in the UK will lose access to the full scope of the VAT MOSS system. Mini One-Stop-Shop (MOSS) is a platform that allows European digital entrepreneurs to use a single point solution for dealing with VAT submission in every member state of the EU. From the beginning of next year, the platform will stop processing VAT data from the UK-based businesses, marking the conclusion of the Brexit transition period.
The EU MOSS system comes in handy for digital companies of any size. So far, it has been used by such digital giants like Spotify and Netflix whenever they’ve sold their services to end customers, as well as several VPN service providers, broadcasters, online gaming companies, and similar. The system simplifies VAT accounting by allowing these companies to register for VAT, charge varied VAT rates in different European countries, and make payments using a single platform.
From the beginning of 2021, the UK businesses will be considered coming from a third country. Based on the HMRC guidelines, they will lose the possibility to use the MOSS system to account from VAT transactions made after December 2020. The final returns for transactions made by 31 December 2020, should be submitted to the UK VAT MOSS system by 20 January 2021. UK companies will be able to access MOSS to edit their prior returns for another year and update their registration details for another three years.
The upcoming changes leave not much time to decide what the digital business owners in the UK should do next. In order to continue selling their goods and services in the EU, these businesses will have to either register for VAT MOSS in any EU member state or VAT in each EU member state. If a company decides to register for VAT MOSS in an EU member state, it will have to do that by the 10th day of the month after the first sale to a customer from the EU. In case a company does not want to use the EU VAT MOSS platform, it should register for VAT in each of the EU member countries where it sells digital goods or services.
It is normal to find confusing the changes in tax regulation after the Brexit transition period – especially if you are located in the UK and own a business that supplies digital goods or services to the EU. If you are feeling unsure, get in touch with 1StopVAT team, and our tax experts will suggest the solution that is optimal for your situation!