EU VAT rules change in 2015: Establishing your business in Switzerland?

Currently, telecommunications and broadcasting companies as well as providers of electronic services to consumers (B2C) are at a disadvantage when it comes to VAT if they are established outside the EU (e.g., in Switzerland). As from 1 January 2015, this will no longer be the case.

Current state

EU telecommunications and broadcasting companies as well as providers of electronic services to EU consumers (B2C) are taxed where the supplier is established; if provided by a non-EU business, they are taxed where the EU consumers are established or the services are used and enjoyed. For example, a Luxembourg supplier has to charge 15% Luxembourg VAT (lowest rate in the EU) to EU consumers regardless where they are established, while a Swiss supplier has to charge the VAT of the EU Member State where EU consumers are domiciled or the services are used and enjoyed (i.e. anywhere from 15% to 27%). These discrepancies, combined with compliance constraints, imply that suppliers are reluctant to establish their businesses outside the EU (e.g. Switzerland).

Changes as of 1 January 2015

As from 1 January 2015, EU businesses and non-EU businesses will be treated equally from a VAT point of view. Indeed, telecommunications, broadcasting and electronically supplied services provided to EU consumers will be taxed where the consumers are domiciled, regardless of where the suppliers are established. In the above example, the Hungarian customer will pay 27% Hungarian VAT on the received services whether it is provided by a Luxembourg or a Swiss supplier. Along with the change of the place-of-supply rules, a “Mini One Stop Shop” will be introduced, giving both EU suppliers and non-EU suppliers the possibility to register for VAT in a single EU Member State through which they will account for VAT on services to customers in other EU Member States.

read full article at KPMG