Under the current EU law suppliers, who are not established within the EU, providing electronic services to non VAT registered customers (BtoC), have to account and pay VAT at the VAT rate of the member state in which the service recipient is domiciled. As from 2015 this rule will also apply to suppliers established within the EU which until 2015 can apply the VAT rate of the member state of their establishment.
This change of the place of supply rule brings lots to think about and to implement. Crucial for the supplier and for his VAT liability will be applying the VAT rate of the member state in which the customer without VAT registration is domiciled.
Collection and prove of VAT numbers will once again gain increasing importance. However the most difficult question will be how to determine and prove the customer location. The EU Commission proposes a number of possible ways how to provide the evidence. Among these are technical evidence like IP (internet protocol) addresses, SIM (subscriber identity mobile) cards or geolocation as well as payment based evidence like billing address, customer prompted identification and customers bank account country.
There are several issues to be solved by the Commission, by the VAT authorities of the individual member states as well as by the businesses. Due to the application of MOSS (mini-one-stop-shop) as from 2015 we will face increased information sharing between the member states tax authorities and the number of bodies with right to carry out a VAT audit will increase.
Therefore being prepared is not a nice-to-have but an essential requirement to protect the margin.