As of 1 January 2015 new VAT rules will come in force in relation to business to consumer (B2C) electronically supplied services, telecommunications and broadcasting services. In a nutshell, the place of supply of these services shall no longer be considered to be the place where the supplier is established but shall shift to the place where the customer is established, has his permanent address or usually resides.
These changes will affect all companies established in an EU member state which provide cross-border electronically supplied services, including remote gaming companies. Remote gaming companies established in an EU member state shall no longer charge their domestic VAT rates/ or apply domestic exemptions on services provided to non-taxable customers established in the EU but would need to apply VAT rate/exemptions as applicable in the country of consumption, where the customer is located.
As a result of these VAT changes it would be important for remote gaming companies providing B2C supplies to identify (i) the status of the customer and (ii) the location of the customer. Is the customer a taxable or non-taxable person? Generally if a customer provides to the supplier a VAT number it would serve as an indication that the customer is a taxable person. It is also very important for the supplier to locate the customer in order to apply the correct VAT rules in the correct member state of consumption. The EU regulation provides for a number of presumptions which assist the supplier to locate his customer.
One might ask – isn’t gaming exempt in terms of EU VAT laws? Not all forms of online gaming are exempt in all member states and different member states apply different rules in determining whether a service is exempt or otherwise. For example, some member states distinguish between games of chance and games of skill and not all member states are in agreement on what actually constitutes a game of skill and what constitutes a game of chance. Others, like Malta, actually provide for games of chance and skill as well. Other member states link the exemption from VAT to gaming tax.
In any case, remote gaming companies will need to be aware of how their services will be treated for VAT purposes in the member state where each of their customers are located and accordingly whether the service will be deemed VAT-able supply in the member state of the customer or otherwise.
Does this mean that remote gaming companies will have to register for VAT in all 28 EU member states and apply the different VAT rates/exemptions accordingly? It depends – there are two options for VAT registration:
Multiple registrations in the respective member states where the remote gaming company is providing its services, or
One VAT registration through the Mini One-Stop Shop. In this case, the remote gaming company would register for VAT in one member state (‘Member State of Identification’) and account for VAT at the rate applicable in the member state of consumption, through one electronic VAT return procedure in the Member State of Identification. Suppliers will have one VAT identification number and will have to deal with one VAT authority. This arrangement thus aims to reduce VAT compliance burden by avoiding multiple registrations across the various member states where a supplier may have its customers.
In view of the above we strongly suggest that remote gaming companies seek professional advice about the following:
- review of services provided by the company to assess whether the services being provided are considered as electronically supplied services;
- implementing a system to identify the location of the customer;
- the pro and cons of Mini One-Stop Shop and multiple registrations;
- assistance with VAT compliance obligations;
- IT systems that will help you in achieving compliance.
WH Partners can provide help and further information to remote gaming companies for them to understand better as to what is going to change in practice.