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Electronic services value added tax (VAT) system

The VAT system will change for electronic services provided to private individuals in the European Union (EU). Products such as Itunes, apple software, apps, Vodafone, Orange, T Mobile and all other phone services, downloading films, music, e-learning are regarded electronic services. How does the registration procedure start?

The rule till the end of 2014 is that these services are taxed for VAT purposes in the country where the provider is situated. Providers not situated in the EU are not taxed. The VAT is then out so scope.

This will change. Non EU entrepreneurs selling within the EU are from January 1, 2015 obliged to pay the Value Added Tax due in the EU country where the services has been sold. The company then has to determine where the private individual is living. Best method is asking for the address and verify this somehow. Consequently the price of the service or the margin of the service, depending on the choice of the selling company, fluctuates with the VAT percentage of that EU country.

A Non EU entrepreneur not having a permanent establishment in the EU has a choice. Either register themselves in all 28 EU countries to file in each individual country the EU VAT. Or to register in one country and file for all 28 EU countries the VA T in that country. It does not matter if the registration is done in for instance France with 19% VAT or Denmark with 25% VAT. The VAT that is due is the VAT of the EU country where the service has been sold. So the rate in the registration country does not influence the amount of VAT to be paid.

We suggest to register in the Netherlands as the Dutch tax office is very much aware of the fact that it takes two to collect the right amount of tax. The Dutch online system is convenient and in case of dispute over the tax amount due there is a sophisticated system guarding the rights and obligations of the tax payers.

The registration procedure for the EU VAT has already started in order to be operative as of January 1, 2015. Please contact us as soon as convenient to set up the registration for NON EU VAT entrepreneurs.

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