VAT changes in 2015 set to affect businesses and customers
Changes to taxation for telecommunication, broadcast, media and content will affect both customers and business from 2015. Those who may be involved are being encouraged to prepare for it as effectively as they can.
From January 1 2015, the changes mean they will become taxable in the EU country of the customer rather than the provider.
Businesses based in the UK will already be paying tax at the domestic rate but the changes mean businesses must be prepared to pay different rates depending on the location of the customer.
Any electronically sent information will be included; meaning businesses with EU clients which include subscriptions will be affected, as will those smaller companies which offer access to journals or magazines electronically.
The importance of preparation
As a result businesses are being encouraged to prepare for the changes to ensure that the transition is as smooth as possible.
The changes are likely to make the process more complicated so preparation will ensure that profits are not cut and that customers are unaffected. Specialist business recovery firms can also assist you with advice in this regard.
Businesses with greater amounts of in-house resources are in a better position to cope with the changes, while additional support might be required depending on the size of the business.
In order to fully comply with the new rules, businesses must be aware of their tax liabilities across various jurisdictions and act accordingly to ensure they are met.
Companies are also being encouraged to ensure they have sufficient plans in place to make sure they can accurately report the location of customers.
The tax which is liable is dependent on this data, so updating systems might be required to ensure accuracy without impacting upon the customer’s experience.
This is obviously vital for the long-term sustainability of many businesses as customers could easily be forced away by a negative experience.
Tax rates vary across the EU so pricing strategies may need to be altered – VAT rates in Luxembourg are just 3% but are as high as 27% in Hungary.
Businesses are being encouraged to act early to limit the disruption that the changes may make in the future, by adopting new practices where necessary and by ensuring everything is in place to continue functioning in a clear and profitable manner.
By Phil Smith