EU to consider VAT MOSS for physical goods

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The European Commission is again taking at look at cross border trade and considering how to make it simpler for both consumers and for retailers.

One of the issues they have identified is geo-blocking, that is the practise of refusing to sell to other EU countries. One of the top reasons for geo-blocking has nothing to do with logistics, it’s quite bluntly because registering for VAT in multiple EU countries is still time consuming and expensive. Then, once you have registered for VAT, you have a ton of paperwork to complete and potentially 28 VAT payments to make each quarter. For small businesses and start ups it’s simply too complex and too expensive to comply so it’s easier to refuse to sell.

Since the 1st of January 2015, sellers of digital good have been able to register for VAT Mini One Stop Shop (VAT MOSS) in their home country and from then on submit quarterly VAT returns and pay all EU VAT locally. The EU now propose to extend VAT MOSS to include physical goods delivered from one EU country to another. More news is expected this week.

On the face of it, this sounds like good news as it would simplify VAT but there are too many unanswered questions. Would this cover stock held in other countries such as Amazon European FBA and what will happen with BREXIT – will the UK even be in the EU by the time VAT MOSS is extended to physical goods?

Even if the UK is still in the EU, with VAT MOSS every company no matter how small was required to register even if their turnover was below the normal UK threshold for registering for UK VAT. A single overseas sale required you to register for VAT MOSS… that is until the government got fed up administering payments which in some cases were literally pennies.

It’s probably that you’d have a choice whether to register for VAT MOSS or if you’d prefer to register individually with each of the countries you choose to trade with. The idea is good, but having seen VAT MOSS roll out for digital goods it’s likely to cause some pain for businesses, especially those who aren’t and don’t need to be VAT registered in the UK.

5 Responses

  1. There are 3 major issues.

    1. Threshold – theoretically this could apply to a single sale made on eBay or Amazon – other countries may not agree this is a private sale

    2. zero rated goods, such as children’s clothing, food, books etc – these sales would NEVER be VAT free as no other country charges VAT at this rate. Under existing rules, UK VAT (at 0%) applied until the sales to each country exceeded EUR 35k or EUR 100K

    3. No distance selling rules – so effective VAT registration in each MS at the drop of a hat. See 2 above.

    Any time the EU says ‘simplification’, this is a MASSIVE red flag that means extra tax and compliance. The EU have it in their plans to extend MOSS to all sales, so, personally, the sooner we are out of this madness, the better!

  2. With all the problems they’re having with VAT MOSS the EU were considering changing the system for small businesses so that digital sellers didn’t suffer under the system designed to catch large businesses. The proposed changes probably can’t be implemented until 2018 (such is bureaucratic red tape), so it’s hard to believe they would implement the same mistake, and decimate the lives of many small businesses by doing exactly the same thing.
    If the UK leaves the EU (and possibly Italy and other countries may follow suit in the right circumstances), it will all become irrelevant anyway.

  3. As VAT is a european institution presumably the government will scrap the collection of this tax once brexit occurs!

  4. VAT (and this looming) was one of the many reasons I voted to leave. And the papers all think it was about funding the NHS….


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