How the EU 2015 VAT changes affect you

New VAT laws next year will have a major impact on online games businesses.

Ahead of a conference on the situation, Robert Hammerl and Matthias Luther of VAT specialist KMLZ explains what the changes mean for the UK

At this year’s Gamescom congress, BIU – the German Entertainment Software Association, is offering a seminar on the 2015 VAT changes for online content providers and developers.

For this seminar, BIU has teamed up with KMLZ, (one of Germany’s leading VAT specialists) and it is relevant to all companies offering B2C e-services.

1. New rules for online content providers and developers

As of January 1st 2015, EU online content providers and developers will face one of the most significant changes ever to VAT rules. To date, European B2C providers of e-services, such as online games, could charge their services with their local VAT. But next year these providers will have to charge the VAT rate of the customer’s country. A British online gaming provider currently charges 20 per cent UK VAT for all its services to private EU customers. In future, it will have to charge 19 per cent VAT to its German customers,
23 per cent VAT to its Irish customers and 24 per cent VAT to its Finnish customers.

This change in the rules will place a considerable administrative burden on the company because:

• It has to be able to locate its customer.
• It has to be able to document the identified location; and
• It has to monitor the EU VAT rates and all upcoming changes.

Moreover, since the company has to charge the VAT rate of the customer’s country, its turnover is subject to the VAT rules in this country and to VAT audits by this country. In this context, it should be taken into account that Eastern EU countries, in particular, impose high penalties on any companies that do not comply with their local tax rules. Finally, there will be an entirely new reporting procedure introduced called Mini One Stop Shop (MOSS). This enables companies to report their B2C e-services in different EU Member States in one single VAT return.

2. New rules for app developers and publishers

On the other hand, the new VAT rules will simplify the VAT treatment for app developers and publishers. They will generally be considered to have provided their services to the app stores rather than directly to the end customers. Consequently, app developers and publishers will not be subject to the above mentioned burdens. However, there are still some pitfalls, which these companies need to be aware of, in order to avoid unnecessary VAT risks.

3. August 14th seminar

The four-hour seminar speakers will explain the new rules and how online content providers and developers will be affected by them. However, the primary focus of the seminar will be addressing the most import issues that companies will be facing in light of the new 2015 VAT rules:

• When do I use which VAT rate?
• How can I identify my customer’s location? How do I have to document the location for the tax authorities?
• How do I report my turnover in other EU Member States?
• When should I start to implement the new rules?
• How do the new rules affect my bookkeeping?
• How do foreign tax authorities audit my foreign turnover? What are my obligations?
• What do app companies have to take into account?
• How will app stores approach the new rules?

The seminar’s panellists will be David Sweeney, Robert Hammerl and Matthias Luther. David is Senior Counsel for ISFE, which represents the European video game Industry. Hammerl is a managing associate and Luther is an associate at KMLZ. Both regularly advise online gaming and e-commerce clients, especially with regard to new VAT rules.