Introduction to VAT MOSS

What is VAT MOSS?

VAT MOSS occurs when there are sales of digital services from UK businesses to EU customers. Under these rules, the UK business must charge the VAT rate in the country the customer is located. 

VAT MOSS provides a mechanism of reporting and paying over the EU VAT in one process, rather than having to register for VAT in each individual EU country.

Key Aspects of VAT MOSS

  • VAT MOSS is only relevant to B2C (Business to Consumer) sales. B2B (Business to Business) sales do not apply here, as they would fall under the EC Sales List rules.
  • 'Digital services' is defined by HMRC here. Typically for our clients this covers sale of things such as software, apps, e-books, online magazines, web hosting and online advertising. Sales of physical goods or consultancy services do not fall under the VAT MOSS rules. 
  • VAT MOSS sales are reported to HMRC on a quarterly basis. 
  • A single payment is made by the UK business to HMRC, who will then distribute the VAT to each individual EU country.

What does a VAT MOSS return look like?

A typical VAT MOSS return looks like this:

In this example the UK business will make a single payment of £14,962.70 to HMRC who will then distribute the relevant amount to each individual country. 

What are the deadlines for filing with HMRC?

VAT MOSS returns are always filed by reference to a calendar quarter. The deadlines are as follows:

  • 1 January to 31 March - Due by 20 April
  • 1 April to 30 June - Due by 20 July
  • 1 July to 30 September - Due by 20 October
  • 1 October to 31 December - Due by 20 January

Is there a threshold for registering for VAT MOSS?

The threshold is EU sales, excluding VAT, of €10,000. 

You could therefore be registered for VAT MOSS but not UK VAT which has a much higher threshold (see current UK VAT registration threshold).

How do I identify where my customer is located?

A business will usually require two pieces of evidence to identify where the customer is located. Examples of such evidence include:

  • the billing address of the customer
  • the IP address of the device used by the customer
  • customer's bank details
  • the country code of the SIM card used by the customer
  • the location of the customer's fixed landline through which the service is supplied
  • other commercially relevant information - for example, product coding information which electronically links the sale to a particular jurisdiction

UK micro-businesses, that are below the current UK VAT registration threshold and are registered for the VAT MOSS scheme, may use their best judgement and base their consumer location VAT taxation and accounting decisions on a single piece of information. That information can be the billing address given by the consumer or information given to them by their payment service provider.

How do I keep up to date with the latest VAT rates in each EU country?

VAT rates are available from the European Commission’s website here.

What if I sell my digital service via the App Store or Google Play?

Businesses that sell through the App Store or Google Play are unaffected by the VAT MOSS rules as Apple and Google will handle the sales taxes and reporting on your behalf. However, if you sell directly to consumers, e.g. via Stripe, then you may need to register. 

What will happen post Brexit?

It is unclear how VAT MOSS will work once Britain leaves the EU. A possible solution will be that UK businesses will need to register for VAT MOSS in Ireland. The process and tax treatment will therefore remain the same; except instead of submitting returns to HMRC you would submit returns to the Revenue in Ireland.

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