By Jason Tucker, The Organic Agency
New changes to the way that telecommunication, broadcast, media and content are taxed are set to affect both customers and businesses from 2015 onwards.
The changes, which come into force on 1st January 2015, mean that telecommunication, broadcast, media and content will become taxable in the EU country of the customer, rather than the provider. If your business is based in the UK, you will already be paying tax at the domestic rate but from 1st January 2015, businesses must be equipped to pay differing rates of tax, depending on the location of your customer.
Any businesses which supply electronic information to customers in the EU will be affected by the changes. Although this includes subscriptions to large electronic databases, smaller businesses which offer electronic access to journals or magazines will also be affected.
Although the changes are likely to make things more complicated for businesses operating within the EU, preparation is the key to ensuring the transition runs smoothly. By preparing your business in advance, you can ensure that the company doesn’t suffer a loss of profit and that customers are unaffected by the changes.
One of the first things to address is whether your business has sufficient in-house resources to cope with the changes or whether you require additional support. In order to be fully compliant, you must be aware of your tax liability across various jurisdictions and act accordingly.
The changes may mean that you enhance your current business systems or outsource some of the data capture elements. As the tax your business is liable for is dependent on the location of your customers, it’s essential that you capture and record their location accurately.
Although your current system may be able to capture and record such information, improvements may need to be made to ensure this can be done without negatively affecting the customer’s experience. Whilst it’s essential to record the relevant information, it’s also important to retain the customer by offering a positive customer experience.
With the rates of tax varying across EU countries, you may need to alter your pricing strategies to ensure you don’t suffer a loss in profits. With VAT rates for electronic services at just 3% in Luxembourg but 27% in Hungary, it’s easy to see how the differing rates will affect business profits unless appropriate pricing strategies are put in place.
Although the changes don’t come into force until 1st January 2015, it may take some time to ensure the business is fully compliant and operating as cost effectively as possible. By addressing the issue early, adopting new practices where necessary and obtaining assistance from external service providers when needed, businesses can avoid losing customers or profit and can continue to function effectively and successfully.