The MOSS system will allow merchants to pay VAT more easily
The MOSS system, otherwise referred to as mini one stop shop will allow merchants all over the EU to pay VAT more easily. The MOSS system has been introduced to ease the administration burden on merchants affected by the Council directive 2008/8/EC.
According to the Art. 5 of the Directive, from January 1, 2015 the place of supply of the following services to a non-taxable person shall be the place where that person is established, has his permanent address or usually resides: (a) telecommunications services; (b) radio and television broadcasting services; (c) electronically supplied services. Which imposes the merchants to collect and pay VAT in the country of residence of the non-taxable person.
Benefits of MOSS
The MOSS system allows a merchant to identify one tax authority in the EU as its Member State of Identification. For the EU merchants the Member State of Identification will typically be their local tax authority. A non-EU merchant is free to choose any member state as their MSI.
Once the Member State of Identification has been selected, then all VAT collected on sales in the EU is declared via a web portal with the Member State of Identification. In turn, the Member State of Identification distributes the correct VAT to each EU member state in which the merchant recorded digital service sales.
It shall be noted that the use of the MOSS system is optional. However the only other option available is to register individually as VAT payer in each of the EU member states where the merchant sold any of his services. This poses a great logistic, legal and financial challenge to the merchants, so the MOSS system is considered to be a much better alternative.
Use of MOSS
All merchants that sell digital ‘B2C’ services in the EU can use the MOSS system. There is no threshold on turnover, so regardless of numbers of the sales, merchants shall use the MOSS system if they sell above mentioned services to the customers which are established in a different EU country. For example, the turnover threshold to register as VAT payer in Lithuania is 45 000 EUR per tax year. If the taxable person does not reach the threshold but he sells digital services to the customers established in other EU countries, the obligation to either use MOSS system or register as VAT payer in those countries will still apply.
Jovita Valatkaitė
English speaking lawyer the Gencs Valters Law Firm in Vilnius, practising in field of Tax law in Lithuania, Latvia and Estonia.
T: +370 67 24 0090
F: +372 67 24 0091