EU VAT is a nightmare.
Here is an example of why its complicated…
Before 1st January 2015 all businesses supplying telecommunications, broadcasting and e-services such as downloaded ‘apps’, music, gaming, e-books and similar services to private consumers located in other EU Member States (referred to as ‘B2C’ supplies) were taxed where the business supplier was established, which is simple to understand and implement.
Since 1st January 2015 VAT is now charged in the country where the customer has ‘use and enjoyment’ of the services.
So lets say you are an American (normally zero rated) on holiday in France, even though you pay with an American credit card and buy from a UK supplier because you are reading your ebook in France, French VAT will apply. Sounds like a nightmare, doesn’t it.
To help with this HMRC introduced the VAT MOSS (Mini One Stop Shop).
Then there is is the VAT return….
Box 2 Acquisition Tax is calculated as UK VAT due on VAT free purchase of goods from other Member States, i.e. 20% x Box 9 figure, the same amount is then entered in Box 4 (as noted below by HMRC) so the net effect is Zero.
Box 9 Total EU Purchases are the value of goods bought from other EU Member States on a VAT free basis.
The following are HMRC’s instructions:
Box 2: VAT due from you (but not paid) on acquisitions from other EU countries
You need to work out the VAT due – but not yet paid by you – on goods that you buy from other EU countries, and any services directly related to those goods (such as delivery charges). Put the figure in Box 2. You may be able to reclaim this amount, and if so remember to include this figure in your total in Box 4.
Box 4: VAT reclaimable on your purchases
This is the VAT you have been charged on your purchases for use in your business. You should also include:
- VAT due (but not paid) on goods from other EU countries and services directly related to those goods (such as delivery charges) – this is the figure you put in Box 2
If you trade regularly with the EU you may be required to do Intrastat Returns
Here is a useful guide from Sage.