Influence of the recent changes in EU VAT regulations on the financial situation of British micro businesses providing digital services to end consumers.
Nalewajk, Jolanta (2016)
Haaga-Helia ammattikorkeakoulu
2016
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-201605076481
https://urn.fi/URN:NBN:fi:amk-201605076481
Tiivistelmä
This Bachelor’s thesis report aims to present the process and results of research focusing on the influence of the recent changes in EU VAT regulations on the financial situation of British micro businesses providing digital services to end consumers. In particular it studies the amendments in Regulation (EC) No 1798/2003, which has been in force since January 1, 2015, and states the shift of place of supply from the seller to the buyer in case of telecommunications, broadcasting and electronically supplied services.
Despite the fact, that recent EU VAT changes were aimed at big, multinational organizations, which before 2015 benefited from a possibility to register only in one EU Member State with the lowest VAT rate, the new law appears to be a big concern for the smallest companies. It resulted in an obligation for all enterprises providing cross-border electronic services to end consumers from the European Union to register to a VAT system and use VAT rates applicable in each of the EU Member States they sell to, as well as to collect and store data on the location of their customers. From among all the affected organisations, micro businesses in the United Kingdom seem to suffer the most, due to Europe’s highest VAT exemption thresh-old (£81,000 at the time of the research).
The theoretical part of the thesis focuses on indirect taxation, with a special emphasis on value added tax. Short history and an overview of current systems of VAT are presented, including key concepts such as value added tax, cross-border sales of goods and services, place of supply, minimal human intervention and VAT MOSS.
The research performed was of a quantitative nature and used a 28-questions survey. The inquiries concerned issues regarding VAT obligations, cross-border sales, compliance costs, profitability and the overall financial situation of the respondents. Data collecting process took place between 2 and 23 November 2015 and was carried out in two ways: a hyperlink posted online and provided by e-mail. Due to a very low number of respondents, the author made every effort to support the results with thorough secondary research in order to improve the credibility of the study.
The thesis research confirmed that the financial and overall situation of British micro businesses providing digital services to consumers from other EU Member States is alarming. Most of the companies reported a decrease in cross-border sales, an increase of costs and a substantial drop in profitability. The study also revealed that many of the entrepreneurs struggle to sustain their operations due to new obligations imposed upon them by VAT MOSS.
Despite the fact, that recent EU VAT changes were aimed at big, multinational organizations, which before 2015 benefited from a possibility to register only in one EU Member State with the lowest VAT rate, the new law appears to be a big concern for the smallest companies. It resulted in an obligation for all enterprises providing cross-border electronic services to end consumers from the European Union to register to a VAT system and use VAT rates applicable in each of the EU Member States they sell to, as well as to collect and store data on the location of their customers. From among all the affected organisations, micro businesses in the United Kingdom seem to suffer the most, due to Europe’s highest VAT exemption thresh-old (£81,000 at the time of the research).
The theoretical part of the thesis focuses on indirect taxation, with a special emphasis on value added tax. Short history and an overview of current systems of VAT are presented, including key concepts such as value added tax, cross-border sales of goods and services, place of supply, minimal human intervention and VAT MOSS.
The research performed was of a quantitative nature and used a 28-questions survey. The inquiries concerned issues regarding VAT obligations, cross-border sales, compliance costs, profitability and the overall financial situation of the respondents. Data collecting process took place between 2 and 23 November 2015 and was carried out in two ways: a hyperlink posted online and provided by e-mail. Due to a very low number of respondents, the author made every effort to support the results with thorough secondary research in order to improve the credibility of the study.
The thesis research confirmed that the financial and overall situation of British micro businesses providing digital services to consumers from other EU Member States is alarming. Most of the companies reported a decrease in cross-border sales, an increase of costs and a substantial drop in profitability. The study also revealed that many of the entrepreneurs struggle to sustain their operations due to new obligations imposed upon them by VAT MOSS.