VAT rules for digital services

7.1.2015

Question for written answer P-000125-15
to the Commission
Rule 130
Neena Gill (S&D)

On 1 January 2015 the new EU VAT legislation came into force. It was designed to prevent Internet giants from avoiding tax, but will have a disproportionate effect on the smallest firms.

The rule change will force small businesses, including those currently under the VAT turnover threshold, to register for VAT. This will increase the costs to SMEs as well as the administrative burden.

Current estimates suggest that this will affect 264 000 early-stage businesses in the UK alone.

The VAT MOSS (VAT Mini One-stop Shop) system is perceived as a disincentive to supplying consumers in other Member States and as going against the trend towards greater international trade, particularly over the Internet.

Is the Commission aware of these problems? How does this kind of legislation fit with the new Commission’s political priority of investing in the European economy with the digital economy as a centrepiece?

Did the Commission analyse the potential impact of this legislation on SMEs? If so, what was its estimate of the negative impact of the measures on SMEs, and how would this be outweighed by potential positive effects?

If the Commission concludes that this legislation is disproportionate for a huge number of SMEs, will it propose a threshold under which small enterprises would be exempted from the VAT legislation?