Within the European Union, there are many facilities for business people. These make it easier to obtain information on the correct VAT rates, possible tax credits or subsidies.
European solutions are available to simplify the tax system and encourage intra-Community transactions. One of these is VAT MOSS, the special tax settlement mechanism. What is VAT MOSS in details and who can benefit from it?
VAT MOSS – simplification for companies
What is VAT MOSS can be partly understood by expanding on this acronym. VAT Mini One Stop Shop, applies to companies engaged in the provision of telecommunications services or the sale of digital services to non-VAT payers. It ensures that businesses do not have to register for VAT in every EU Member State in which they operate. This represents a major convenience, especially for newcomers to local markets. In 2021, the VAT MOSS system was replaced by systems called VAT OSS and VAT IOSS, which extend the previous methods by adding new options available to traders. However, until the end of 2024, VAT MOSS can still be used to make adjustments to registration information.
Country of identification of the trader
When registering for VAT MOSS, a business must select one of the European Union countries as its country of identification. This can be determined by the place of establishment of the business or branches. When operating outside the European Union, the VAT MOSS system does not apply. This means that a trader without a European establishment cannot apply to participate in this system. A business that is successfully registered for VAT MOSS submits a VAT return in its country of identification and settles transactions made throughout the European Union, rather than charging VAT in each country separately.
Settlement of VAT overpayment
If there is an overpayment of VAT under the VAT MOSS scheme, the tax authorities of the country where the sale to consumers was made will refund the overpaid amount. It is worth mentioning that all countries make refunds in their own currency. When using VAT MOSS, you will also receive part of your refund from the tax authority of the country where the activity took place. This is because the tax authority retains part of the amount due as an administrative fee before sending the balance information to the country where the VAT is due. The refund can only be sent to a bank account that has been entered into the VAT MOSS system.
Tax liability in the United Kingdom
Currently, the United Kingdom is not considered an EU country and therefore transactions cannot be accounted for under the VAT MOSS system. Therefore, any trader interested in starting a business in this country must familiarize themselves with the separate UK regulations and tax regime. Regardless of the country chosen, it is advisable to use a specialized accounting office. This allows you to sell goods and services without worrying about non-compliance with dynamically changing legislation over time.
