NetSuite has announced that it will update its software before the end of November so that its customers supplying digital services can easily comply with the changes to EU VAT rules that come into effect from the start of 2015.
The changes to the EU VAT place of supply of digital services rules will affect all companies who are supplying broadcasting, telecommunications and e-services (‘digital services’) to consumers in the EU. Presently, the amount of VAT to be applied to digital services is determined by the location of the supplier but from 1st January 2015 onwards, the place of taxation will be the location of the consumer.
The new rules represent a potentially huge technical and administrative headache for e-services companies as it will be their responsibility to establish where their consumers are based and therefore what level of VAT needs to be paid. They will also have to provide proof of customer location beyond a billing address, such as the IP address the customer is using to purchase or download their services.
Organisations unable to comply with the new rules will be penalised depending on which EU member’s tax regulation they are deemed to have broken. Fines will vary across the EU, but may be as high as double the amount of unpaid VAT, and, in some EU member states, companies may also face legal and criminal proceedings.
How can NetSuite help?
NetSuite can already automatically handle the required functionality to comply with the major new tax regulation change, but in order to make it easier for its digital customers – which include the likes of Shazam, Box.com and Zendesk – to remain VAT-compliant, NetSuite is planning to release a free and seamless enhancement to address the specific issue of e-services consumption location.
Speaking about the enhancements, NetSuite Senior Vice President, Products and Engineering, Craig Sullivan had the following to say –
“NetSuite is justly proud of its long pioneering history of automating complex tax compliance requirements so our customers don’t have to shoulder that burden. Our direct response to this latest tax change means NetSuite customers can enjoy the holiday season safe in the knowledge that, thanks to NetSuite, they will be fully prepared when the new EU VAT regulation goes into effect as 2015 dawns.”
What will the enhancement include?
NetSuite customers can rely on their software to automate the vast majority of the functionality required by the change in VAT regulation. And for customers choosing the ‘Mini One Stop Shop (MOSS)‘ option, the enhancement will include:
- The automatic creation of all tax codes and rates based on the tax jurisdiction that the e-services provider has registered in.
- The ability for companies to select which items in their NetSuite account are e-services, so differentiating between goods/non-e-services and e-services.
- Automatic determination of the tax rate based on the service selected and the customer location (IP and billing address) for all sales orders and invoices.
- The provision of new reports containing details of all MOSS transactions.
- Online submission of the MOSS transactions.
- The ability to charge tax based on the country of a consumer’s bank account and credit card.
Having changes related to VAT compliance handled automatically is a huge advantage to users of NetSuite. On-premise ERP software from competitors such as Microsoft, Sage and SAP will not be providing their own solutions and users will instead have to use third-party tax software to ensure they’re compliant with the rules.
NetSuite is running a free one-hour webinar for NetSuite administrators. financial controllers, and accountants in businesses that provide services electronically. Titled “Enabling EU VAT Changes Coming in 2015”, the webinar will be held from 3pm – 4pm on Tuesday 9th December. Register here.
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