A. INTRODUCTION

The VAT E-commerce Package adopted by the Council on the 5th of December 2017 includes several changes that will be gradually implemented, some changes will be effective as from the 1st of January 2019 and the rest as from the 1st of January 2021.

This update

refers to the changes that come into force as from the 1st of

January 2019 based on the EU Council Directive 2017/2455, EU Council Regulation

2017/2454 and EU Council Implementing Regulation 2017/2459, which are the

following:

1.

The introduction of a threshold up to

which the place of supply of telecommunications, broadcasting and

electronically supplied services ('TBE services') is considered to be the place

where the supplier is situated.

One piece of evidence is sufficient

to determine the place of supply of transactions of the supplier with total

supplies below the threshold of EUR 100,000.

3.

A supplier using the MOSS will only have

to respect the invoicing rules of the Member State in which he is identified

for the MOSS,

4.The Mini One Stop Shop (MOSS) Regime is broadened so as to enable Non-EU

suppliers supplying TBE services to individuals within EU, to use the Non-EU

MOSS scheme even if they are registered for VAT in the EU.

The purpose

of these changes is to reduce the burden for small and medium-sized companies (SMEs)

supplying such services to customers within EU both in terms of numerous

registrations and compliance with the reporting and invoicing rules of

different EU Member States (EUMS).

A.

CURRENT PRACTICE

As

from 01.01.2015 until 31.12.2018, the place of supply of TBE services supplied

by a taxable person (the supplier) established in a Member State to a

non-taxable person (the customer) in another Member State was in the Member

State where the customer is established, has his permanent address or usually

resides.

Consequently,

a supplier of TBE services used to impose VAT to the customer at the applicable

VAT rate of the customer's Member State. In order for the supplier to be able

to declare and pay this VAT to the tax authorities in that Member State, he had

to:

1.     Either register

for VAT in each of the EUMS of the customers or

2.      Register for

the MOSS in his own Member State.

That

was very burdensome and costly for micro-businesses, which only occasionally

used to supply TBE services to customers in other EUMS.

1.

Introduction of the EUR 10,000 threshold

As

from 01.01.2019, an annual EUR 10,000 turnover threshold is introduced, up to

which the place of supply of relevant supplies of cross-border TBE services

remains in the Member State where the supplier is established, has his

permanent address or usually resides.

The

application of this threshold is subject to the following conditions:

a) The

supplier is established, has his permanent address or usually resides in only

one Member State;

b) He supplies TBE services to

customers who are established, have their permanent address or usually reside

in another Member State;

c) The total

value of TBE services supplied to other EUMS does not exceed EUR 10,000

(exclusive of VAT) in the current and

in the preceding calendar year.

1.1 Option to apply the general place

of supply rule - taxation in the member state of the customer.

In case the

supplier wishes to apply the general place of supply rule (taxation in the

Member State of the customer), he can do so and will be bound by this decision for

two calendar years. As soon as the threshold of EUR 10,000 is exceeded, the

general rule (Member State of the customer) applies without exception.

1.2 Persons already registered with

MOSS

A

taxable person who is already using the MOSS and whose total value of TBE

services in other EUMS is below or equal to the threshold can deregister from

MOSS as of 1 January 2019 (voluntary deregistration).

A

quarantine period of two calendar quarters will apply during which the taxable

person will not be able to register for MOSS.

2.      EUR 100,000 threshold – one piece of evidence

A

taxable person (the supplier) established in one Member State supplying TBE

services to a non-taxable person (the customer) in another Member State must,

for the majority of situations, keep two items of non-contradictory evidence to

identify the Member State of the customer, which is the Member State where the

supply is subject to VAT (the place of supply).

This

requirement is particularly onerous for SMEs supplying TBE services to

customers in other EUMS.

As

from 01.01.2019, one piece of evidence is sufficient to determine the place of

supply of transactions of the supplier with total supplies below the threshold

of EUR 100,000.

The

application of this threshold is subject to the following conditions:

1)

The total value (exclusive of VAT) of TBE services provided by the

supplier from his business establishment or a fixed establishment located in a MS

to customers who are established, have their permanent address or usually

reside in other EUMS does not exceed EUR 100,000 or the equivalent in national

currency, in the current and in the preceding calendar year;

2)

The item of evidence is provided by a person involved in the

supply of the services other than the supplier or the customer;

3)

the item of evidence is listed below:

a)      Through his

fixed land line, it shall be presumed that the customer is established, has his

permanent address or usually resides at the place of installation of the fixed

land line;

b)      Through mobile

networks, it shall be presumed that the place where the customer is

established, has his permanent address or usually resides is the country

identified by the mobile country code of the SIM card used when receiving those

services;

c)      Services for which

the use of a decoder or similar device or a viewing card is needed and a fixed

land line is not used, it shall be presumed that the customer is established,

has his permanent address or usually resides at the place where that decoder or

similar device is located, or if that place is not known, at the place to which

the viewing card is sent with a view to being used there.

As

soon as the threshold is exceeded during a calendar year, the normal rules

apply, meaning that again two pieces of evidence are required.

3. Invoicing Rules

Invoices

for TBE services to non-taxable persons are to be issued according to the invoicing

rules of the MS where the supply is deemed to arise. For TBE services, this is

generally where the customer is situated unless, as from 01.01.2019 the

supplier has not exceeded the threshold of EUR 10,000 where the place of supply

is considered to be at the place where the supplier is situated.

A supplier

using the MOSS, as from 01.01.2019, will only have to respect the invoicing

rules of the Member State in which he is identified for the MOSS, instead of

the rules of each Member State where his customers are located.

4. Non-union MOSS Scheme –

eligibility

Up

until 31.12.2018, a taxable

person who was not established within the EU but who was registered or was

obliged to register for VAT purposes in one of the EUMS could not use the MOSS

(neither the non-Union scheme nor the Union scheme).

As

from 01.01.2019, such a taxable person will be allowed to use the Non-Union

scheme, which is the MOSS regime for taxable persons not established in the EU

supplying TBE services to customers in the EU.

D.

CONCLUSION

The new

simpler rules for businesses selling cross border services online introduced to

the EU VAT Law, are expected to reduce the burden for SMEs established in a

Member State supplying such services to customers in other EUMS.

With the

effected changes, it is easier for online businesses, especially SMEs to access

other markets and unlock e-commerce in Europe as less time, red tape procedures

and costs are now required.

E. HOW

KINANIS LLC CAN ASSIST

Kinanis LLC

is in a position to assist you with the provision of the following services:

·

Ongoing

advice on the provisions of the Cyprus and EU VAT Law

·

VAT

Registration and subsequent VAT reporting

·

MOSS

registration and subsequent VAT reporting

·

MOSS

Deregistration

·

Assistance

in claiming back refundable input VAT

·

VAT

deregistration

F.

DISCLAIMER

This

publication has been prepared as a general guide and for information purposes

only. It is not a substitution for professional advice. One must not rely on it

without receiving independent advice based on the particular facts of his/her

own case. No responsibility can be accepted by the authors or the publishers

for any loss occasioned by acting or refraining from acting on the basis of

this publication.