Our subscriber owns a website where subscribers pay a fee and have access to all information without restriction. Both businesses and individuals use this website. What is the VAT situation? This article will help to understand how to deal with VAT on digital services in B2B and B2C situation in post-Brexit environment.
Place of supply
General place of supply rules for services did not change when the UK left the EU on 31 December 2020:
B2B sales. Business-to-business – in most cases, the place of supply is the place where the customer is located, so a UK business will not charge VAT on most services supplied to overseas businesses.
B2C sales. Business to consumer – in most cases, the place of supply is where the supplier is located – so UK VAT is usually charged by a British supplier.
Tip. In some professional service sales, no UK VAT is charged if the customer is outside the UK (this used to be outside the EU). Details can be found in VAT Notice 741A.
Digital services
Our subscribers will be glad to know that B2B sales to EU customers, including Ireland, will be covered by the general place of supply rule. As a result, no UK VAT is charged, and the Irish customer deals with the VAT on their Irish return by doing a reverse charge calculation.
In both B2B and B2C sales, a business will charge NI customers VAT since the province is part of the UK as far as the VAT rules for services are concerned. Only for goods supplies are there different procedures because NI is still a member of the EU single market.
Trap. There is no longer a requirement for UK businesses to complete EC Sales Lists for services or GB businesses for goods. A Northern Ireland business must, however, complete them if it sells goods to EU VAT-registered customers.
Non-Union one stop shop
Our subscriber’s biggest challenge has to do with B2C sales to Irish customers. In the case of sales classified as broadcasting, telecommunications, and electronic, the place of supply is the customer’s EU country. The VAT threshold for these sales is zero.
Electronic services are those that are delivered over the Internet with minimal human interaction – therefore, it includes the website subscriptions that are charged by our subscribers.
Two registration options
When it comes to registering and paying Irish VAT, there are two options:
- Subscribers can register for Irish VAT with the Irish tax authorities – this may be helpful if they paid Irish VAT on expenses because input tax can be reclaimed.
- Another option is to choose any EU country and register with the non-Union one-stop shop (OSS). The subscriber will then submit a single return each quarter to the tax authority in that country, including the VAT collected and charged in all EU countries.
Tip. It makes sense to register with the OSS since our subscriber will be able to make B2C digital sales to any EU country, charging local VAT and including it on their quarterly OSS returns.
Our subscriber will charge UK VAT on all sales to NI customers. In the case of business-to-business sales to Irish customers, the customer will do a VAT reverse charge on their VAT return. For business-to-consumer sales to Ireland, however, our subscribers must charge local VAT and either register for Irish VAT or use the one-stop shop to declare and pay this tax.