New EU VAT regulations could threaten micro-businesses

Micro-businesses are protesting against new VAT laws that they say could force them to reconsider (0) trading (trade) in Europe.

From 1 January 2015, EU VAT will be charged in the country where products are (1) ______ (buy) as opposed to the country where they are (2) _____ (sell). The legislation applies to digital products only, such as e-books, online courses or downloads.

UK businesses are currently exempt from paying VAT if they sell under £81,000 worth of products a year. However, this threshold will be (3) ______ (remove) for those exporting digital products and services to Europe, from New Year’s Day.

From January, if a UK business makes a (4) ______ (sell) in another EU member state they will have to pay VAT there. The only way to (5) ________ (compliance) is to register for VAT with that country or register for HMRC's scheme (VAT MOSS). According to the HMRC website, the VAT MOSS scheme (6) ________ (requirement) businesses to submit a ‘single calendar quarterly return’ and VAT payment to HMRC, which then sends the ‘appropriate (7) _________ (inform) and payment to each relevant member state’s tax authority.’

What is changing in this case is that all sales of relevant digital services to EU customers outside the UK will be subject to the local VAT regardless of the value of the sales as there (8) _______ (be) no minimum threshold.

The issue is that once registered for UK VAT, the threshold no longer applies and all UK sales become liable for UK VAT. The new legislation is going to have a huge (9) ________ (finance) impact on people, as well as the administrative burden that comes with it. There are 28 countries in the EU with 75 different VAT rates.

Businesses have three options: register to pay VAT in every EU member state you sell to; register for the VAT MOSS scheme or stop (10) _______  to the EU.

A spokesperson for HMRC says the changes should only have a “small effect on (11) _________ (administer) burdens” and could affect around 34,000 small and medium businesses in the UK.

Some business (12)______ (own) are concerned that the legislation will restrict their opportunities to sell abroad. Tickel, from KPMG, advises small businesses to work out whether it is financially worthwhile for them to keep (13) _______ (trade) in certain countries. She says: “UK-based micro-businesses selling digital services into EU countries should do a careful cost- benefit (14) ________ (analyse).”

 

Exercise 6.

Fill in the following prepositions where necessary.

under     for from       to(x2)     in(x2)     on of(x2)

   

There is no concept _____ (1) “export of services” in Russia. If a Russian company renders services _____ (2) favour of a foreign company the VAT treatment of such services will be determined _____ (3) the basis of the place of supply rules. The place of supply rules _______ (4) cross-border services depends on the nature of these services. _______ (5) the general place of supply rule the services are deemed to be supplied in Russia if the service provider performs business activity ______ (6) Russia. There are exceptions ______ (7) this default rule (for example, the place of supply of transfer of IP rights, consulting, accounting, audit, legal, marketing, information processing services should be determined based on the buyer’s place _____ (8) activity).

Also there is a list of zero VAT-rated services related _____ (9) the transportation of exported goods (international transportation services, services related to provision of railway vehicles/containers and freight-forwarding services related to international carriage or the international transportation of goods (subject ______ (10) certain conditions), etc).

 

Exercise 7.

Match the words (1-4) with their definitions (A-D).

1  HMRC                     A  A court of the law, at the federal or state

                                                   level, that deals with tax disputes in the US.

                                                   On the federal level the court hears cases

                                                   between taxpayers and the Internal Revenue

                                                   Service (IRS). The court is a part of the

                                                   legislative branch of the federal government,

                                                   not the judicial branch.

2  Tax Court                B  Any government entity that is authorized by

                                                   law to assess, levy and collect taxes.

3  Tax authority           C  The U.S. government agency authorized to

                                                   collect federal income taxes and enforce the

                                                   tax laws embodied in the IRS Code

4  Internal Revenue      D  A non-ministerial department of the UK

    Service                               Government responsible for the collection

                                                   of taxes, the payment of some forms of state

                                                   support and the administration of other

                                                   regulatory regimes including the national

                                                   minimum wage.

 

Exercise 8.