From 1 January 2015, the EU VAT rules on place of supply in relation to the sales of "electronic services" have been amended. This change has a significant impact on business to consumer (B2C) transactions, as under the new rules, VAT is applied based on the location of the recipient of the service (i.e. where the customer resides) and not where the supplier is located (as was the case up to 31 December 2014).

Therefore, for example, a Cyprus Company providing "electronic services" to a consumer located in the UK previously applied Cyprus VAT of 19% on supply of such services. Under the new rules, the Cyprus Company should, from 1 January 2015, apply UK VAT of 20% on the said transaction. Furthermore, the Cyprus Company will be required to register for VAT in the UK, submit the relevant VAT returns, and pay the respective UK VAT.

As one can appreciate, the above changes create a significant administrative burden on companies providing electronic services to consumers located within the EU. In an effort to reduce this administrative burden, the Mini One Stop Shop (MOSS) scheme was created. Under the MOSS scheme, the EU supplier can select to report its EU VAT liability in its home country.

Under the MOSS scheme, the EU supplier will submit electronically its quarterly MOSS VAT returns detailing supplies of "electronic services" to EU consumers in other Member States, along with the VAT due.

The following services are considered to be electronic services:

  • Broadcasting services: audio and audio-visual content which is simultaneously listened/viewed by the general public on the basis of a programmed schedule by a person who has editorial responsibility.
  • Telecommunication services: transmission of signals by wire, optical, electromagnetic, or other system which includes fixed and mobile phone services, Voice over Internet Protocol (VoIP), voicemail, call waiting, caller identification, conference call facilitation, paging services and internet access services.
  • Electronically supplied services: services delivered over the internet or via an electronic network with minimal human intervention and includes the supply of services such as images, text (e.g. e-books), music, films, games, website hosting, software and website advertising.

Savva & Associates is well positioned to assist Cypriot companies providing electronic services with the following:

  • Examine applicability of the new VAT rules for your business;
  • Assist with the implementation of systems and processes to facilitate compliance with the new rules;
  • Undertake MOSS registration;
  • Preparation and submission of MOSS reports;
  • Facilitation of VAT liability payments.

Our team of highly experienced professionals can advise you further on VAT issues , on the basis of your particular facts and circumstances. Please feel free to contact Charles Savva at c.savva@savvacyprus.com to discuss how we can be of assistance to you.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.