The European mini one-stop shop: a model for future indirect tax compliance?

Author:Vazquez, Juan
 
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In 2015, the European Union (EU) started a small revolution by introducing the first of its kind regionwide valueadded tax (VAT) registration mechanism, the mini one-stop shop (MOSS). The MOSS was created to ease compliance with changes in the sourcing rules for business-to-consumer (B2C) sales of telecommunications, broadcasting, and electronically supplied services (TBE services), which are now taxable where the consumer is located, regardless of the vendor's place of establishment.

MOSS replaced a previous simplified registration mechanism applicable only to non-EU vendors of e-services, which was almost never used in practice. After two years of experience with MOSS, the European Commission (EC) has laid out a proposal to modernize VAT for cross-border e-commerce. Before addressing the proposed changes, this item covers how MOSS operates and explains why certain provisions need to be amended.

What is the mini one-stop shop, and how does it work?

The 2015 changes in EU sourcing rules resulted in a B2C TBE service provider's being required to register for and collect VAT in each EU member state in which a customer of the provider was established--thus potentially requiring a provider to be registered in 28 jurisdictions currently. This is where MOSS comes in.

MOSS is a system designed to alleviate the registration burden on companies providing TBE services in EU member states. Currently, two MOSS mechanisms operate in the EU: (1) the Union scheme, which applies to EU-established businesses; and (2) the non-Union scheme, which applies to non-EU businesses. From a procedural perspective, the schemes differ, but the main features remain broadly similar for EU and non-EU companies.

As a simplified and optional registration mechanism, MOSS allows companies to register, file quarterly MOSS returns, and remit VAT due to all member states through a single member state, also known as the member state of identification (as opposed to the member state of consumption). The information included in the MOSS return, along with the VAT paid, is transmitted by the member state of identification to the corresponding member state(s) of consumption via a secure network. All compliance matters relating to the provision of TBE services are centralized and handled through the tax authority of the member state of identification.

Is it really that simple? MOSS challenges

To the casual observer, MOSS might appear to be a rather effective, simple, and flawless regionwide compliance mechanism. However, the incomplete harmonization of EU rules, combined with strict MOSS rules, may pose some challenges to companies selling TBE services. Those challenges are a consequence of:

Discrepancies in the treatment of EU and non-EU business: One of the main...

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