Working in the IT industry today brings a handsome salary along with experience. If you own a business company in the IT sector, your business will grow due to the increased demand for digital services worldwide. The EU has made it easy to do business and expand in EU countries without registration in many countries. This is called the VAT MOSS scheme. This article provides you with all the required information, which will help you expand your services to EU countries.
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Explanation of VAT MOSS Scheme for Digital Services
VAT stands for value-added tax, which is imposed by the HMRC on each stage of goods production. Companies operating in the UK and their subsidiaries operating in other countries are liable to pay VAT by the set rate of HMRC. VAT is added from the initial stage of good production.
There is another scheme introduced for maintaining tax flow and company operations at a steady rate. The scheme is known as the VAT MOSS scheme. VAT MOSS stands for VAT Mini One Stop Shop. VAT MOSS is a scheme for companies that provide digital services to other EU countries. This scheme facilitates UK companies and other EU companies providing frequent digital services to one another without registering for new VAT.
Eligibility for VAT MOSS
The VAT MOSS scheme applies to services known as business-to-customer (B2C) services. This scheme does not apply to companies providing digital services to other businesses in EU countries, known as B2B. The business-to-customer services include broadcasting, telecom, and other e-services. The rules of VAT MOSS are applied to individual trades and companies. If a UK company is offering services other than business, for example, as a hobby activity with seasonal sales, and the sale is not a commercial activity, then the company does not need to apply for VAT MOSS.
How Does the VAT MOSS Scheme Work?
The VAT MOSS scheme is designed for businesses to expand their digital services to customers in EU countries, make VAT registration easy, and pay the due VAT amount to HMRC. Following the VAT MOSS, companies must register for VAT only once instead of registering for VAT for each EU country separately. The VAT MOSS scheme has two types:
- Union VAT MOSS for businesses based in the UK and EU
- Non-Union VAT MOSS for businesses based outside the UK and EU
1- Union VAT MOSS
To be eligible for the union VAT MOSS scheme in the UK, the limited company must be:
- Operating in the UK or the company can be a non-EU-based business with a branch operating from the UK
- registered for VAT at HMRC UK
- providing digital services to customers in one of the EU countries.
A limited company can register for Union VAT MOSS if it is providing digital services to one EU member state. On the other hand, if the annual business turnover of a limited company is below the threshold of UK VAT, and the raw materials for digital services are made in an EU member state, then the company must register for UK VAT to become eligible for the union VAT MOSS scheme.
2- Non-Union VAT MOSS
To use the Non-Union VAT MOSS scheme in the UK, your business must:
- be based outside the UK and EU
- have no fixed or business establishments in the UK and EU
- supply digital services to consumers in the UK and EU
- You can only register for the non-union scheme in the UK or one EU member state.
To be eligible for the non-union VAT MOSS scheme in the UK, the limited company must:
- be based outside the UK or EU
- be having no branch or business establishment in the UK or EU
- be providing digital services to customers in the UK or EU
- A company can register for a non-union VAT MOSS scheme either in the UK or in one EU member state.
What are the Scenarios of UK VAT MOSS?
After registering for either of the VAT MOSS schemes in the UK, the company must pay the due VAT amount, which is liable after qualifying certain conditions set by HMRC. The company will send the amount to HMRC in a VAT MOSS return after every four months. A sale that qualifies for VAT MOSS is a cross-border provision of digital services by a company to its customers and not other businesses. A VAT MOSS means a single registration of VAT, so the company will send only one VAT payment to HMRC after every four years. The HMRC will then forward the relevant division of the VAT return to the tax authority where the company customers are based.
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Conclusion
The VAT MOSS scheme is a way of paying VAT in one registration if a limited company is providing digital services to its customers in the UK or other EU member states. The VAT MOSS applies to companies providing digital services to customers and businesses in other EU states. The VAT returns are paid to HMRC, which contributes the tax return to the EU member states where the company customers are based.
Disclaimer: All the information provided in this article on the VAT MOSS scheme, including all the texts and graphics, is general in nature. It does not intend to disregard any of professional advice.
