EU to consider VAT MOSS for physical goods

HMRC letterThe 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.