European VAT for Cloud Computing, Software, Apps, and Other Digital Products and Services: Mastering 2015 Rules

Description

Even companies without a physical presence in the EU must pay close attention to the tax impact of selling electronically accessed products and services, such as software and cloud computing, to customers in EU member countries. Under EU law, VAT may apply to sales of electronic products and services when selling to EU customers even if the sale is done from the United States.

Beginning Jan. 1, 2015, the EU VAT rules applied to sales of “electronically supplied services” have been changed and extended. This means among other things that when a company from the U.S. sells services online (such as software, cloud services, games or telecom services for example) to private persons within the EU, they are required to register for VAT and charge about 20% to the private customers. The services will be taxed where the private customer is located.

The U.S. company that sells products also has to register for VAT and charge VAT if they import to the EU and sell on. VAT rates and tax bases differ across national and local EU jurisdictions. Keeping up with these variations is a crucial and time-consuming undertaking.

Determining the applicable VAT is no simple exercise. Tax professionals and their advisors must consider questions such as whether place of supply rules apply to service transactions, which office incurs the VAT obligation, whether local VAT rates apply, and whether the sale represents a continuing business relationship or a one-time transaction.

Listen as our panel of seasoned tax experts offers strategies for optimizing your company’s VAT compliance and planning in response to the dynamic treatment of digital products and services by European tax authorities.