In the continuing battle between the digital economy and the international tax system, the European tax system is about to claw back a point on the VAT front. From 1 January 2015, the VAT treatment of digital services supplied to consumers is changing and businesses making those supplies will need to be ready.
Currently, when digital services are supplied to consumers, the supplier accounts for VAT based on its own location. However, from the start of next year, this position will be reversed and the place of supply for VAT purposes will be the location of the consumer. If a supplier supplies digital services to consumers in several Member States, the supplier will be obliged to charge, and account for, VAT in each of those Member States – a potential administrative nightmare.