The two basics questions that should be answered to apply the correct VAT treatments are:
B2B and B2C transactions might have different treatments depending the region or countries where you are providing digital services. For example, if your EU company is providing web hosting or streaming music services to another business within the EU, VAT should not be charged and Reverse Charge Mechanism applies. On the contrary if your company is exporting those services out of the EU to another foreign company, then VAT on digital services might apply according to the country of destination tax rules.
For B2C transactions, the customer’s location determines the amount of VAT to be charge according to local VAT rules on Digital Services. For instance, in the EU, VAT MOSS scheme applies for the supply of telecommunications, broadcasting and electronic services (TBE) to customers (non-taxable persons).
There are two general rules for determining the location of your customer:
In order to be able to identify the location of the customer some evidence should be collected, for example:
It is important to keep valid invoices records for all digital transactions as well as evidence for the identification of the location of the customer for at least 10 years.
Each country has its own rules and systems to file VAT returns. Be sure to stay compliant with filing frequency, payments and if required, appoint a Fiscal Representative.
The Mini One Stop Shop or MOSS came into force on 1 January 2015. It allows taxable persons supplying telecommunication services, television and radio broadcasting services and electronically supplied services to non-taxable persons in Member States in which they do not have an establishment to account for the VAT due on those supplies via a web-portal in the Member State in which they are identified. This means you don’t need to register with tax authorities in every EU country you sell to; instead, you can register for VAT, file VAT returns and make payments in one single place. Then the information is securely transferred from the Member State of identification to the relevant Member State of consumption.
supply of software
access to databases
downloading apps or music
The rules only apply where a business meets all of the following criteria:
Two possible registration schemes exist: