The European Union is to establish an expert group to examine the issue and determine best practices to discuss the ways to tax the digital economy. With effect to this the first meeting was held on 12 December, with plans to the European Commission that is expected in the first half of 2014. Pierre Collin is one of the eminent members of the expert group.
Reviewing the concept of permanent establishment to better capture the digital economy is also an important factor for the Base Erosion and Profit Shifting Action Plan (BEPS) which was launched at the request of the G20 Finance Ministers. This led to the set up of a task force on the digital economy, which aimed at identifying the issues raised by the digital economy and possible actions to address them.
A public consultation in early 2014 will take place for which the OECD has asked to prepare a discussion draft with general comments as well as specific input on various questions related to digital economy taxation in both direct and indirect tax areas.
The progress and the development of the indirect taxation framework, namely the upcoming Mini One Stop Shop (MOSS) is equally important. Moss is expected to become effective at the EU level by 1 January 2015. It is a simplification mechanism which permits EU- and non-EU-based companies selling Digital Services to EU-based consumers to electronically file one VAT return and pay all VAT collected in the EU to one Member State.
The Member State where all VAT will be collected would redistribute the proceeds to the Member States where the consumers reside. MOSS is divided into a Union which targets EU providers doing business in EU countries other than the one of their establishment, and a non-Union scheme which targets non-EU providers, i.e., without any establishment in the European Union. Each scheme has its specifications e.g. non-EU traders will be granted an EU VAT number, while EU traders will be making use of existing domestic VAT numbers, but both follow equivalent simplification effects, namely one electronic VAT return for EU transactions.
MOSS is found in more than five different sets of EU acts, including directives and directly applicable regulations. Although the core principles are known, some of the key rules for MOSS are yet to be formally prepared. Besides, how the audit of MOSS will be conducted is yet not known.