Global VAT Revolution in E-commerce and Digital Services Tax – December 2024 Update!

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Highlights

Business-to-Consumer (B2C) Transactions: Distance selling involves transactions between a business and a private consumer located in different EU countries, with the business responsible for transporting the goods to the consumer.
Taxation and Liability: Excise duties are paid in the destination country where the goods are transported. The consignor (seller) is primarily responsible for these duties, though they may appoint a tax representative in some countries who will assume this liability.
Avoiding Double Taxation: To prevent double taxation, excise duties paid in the country of dispatch can be reimbursed according to that country’s regulations.
Consignor Requirements: Before dispatching goods, consignors must register with the competent authority in the destination country, pay excise duties post-delivery, and maintain accurate records of their deliveries.
Country-Specific Regulations: There are specific national rules regarding excise goods, especially concerning tobacco products, which are prohibited for distance selling in most EU countries. Operators must consult their national regulations and the Taxes in Europe Database for detailed guidance.

Starting April 1, 2025, Sri Lanka will require non-resident providers of digital services to charge, collect, and remit an 18% VAT on their electronic services provided to Sri Lankan customers.
This VAT change aims to equalize the service market and follows similar measures implemented by other Asian countries, reflecting discussions with the IMF.
The introduction of VAT for foreign digital service providers will alter the tax landscape, leading to compliance costs for providers and potential price increases for customers.

From January 1, 2025, the EU will change the place of supply rules for B2C virtual services, requiring UK providers to charge VAT based on the consumer’s location rather than the supplier’s location, affecting services like live virtual events and distance learning.
The lack of a formal response from HMRC regarding these changes creates uncertainty for UK suppliers, as potential double taxation could arise if both the UK and EU require VAT on the same services.
UK businesses must prepare for VAT registration in each EU member state or opt for the One Stop Shop (OSS) system to simplify VAT compliance, while also implementing systems to accurately determine customer locations for proper VAT accounting.

Bulgaria