The VAT Treatment of Membership Subscriptions for EU Members Post 1 July
On July 1st the rules concerned with the treatment of goods and services supplied from the UK to private consumers in the EU are changing. From this date the old low value consignment relief rules that meant you could send goods worth upon to €22 without your customer paying duty or VAT are being replaced by new rules. These will require local VAT to be accounted for on low value sales by the supplier in the member state of the customer.
The same will be true of certain services – ones that have a special VAT place of supply such as supplies of digital services. This includes access to web based electronic publications or material.
Membership organisations generally provide their members with some form of newsletter or magazine. Often this takes a physical from, although it is increasingly provided digitally and a membership benefit may well include digital access to an archive of previous editions.
It follows that membership organisations provide their members with goods and services, that if provided separately in the EU will be subject to local VAT. If provided as part of a single supply of services then they won’t be. But will EU member states necessarily agree that the UK view that a membership organisation makes a single supply in the UK is the correct interpretation.
HMRC Policy on generally seeing membership supplies as single supplies that can only be apportioned by concession originated in 200 following the Card Protection Plan case and is becoming increasingly debatable. It may well be that in law membership supplies are multiple supplies that should be apportioned into their different elements. If this is true then following 1 July, a part of the membership supply to an EU member will properly be subject to their local VAT and not subject to UK VAT. The membership organisation will need to register for VAT in the EU – probably under the One Stop Shop. (OSS)
It may be rather unlikely that this issue will arise as a result of an electronic publication being provided as the local tax authorities will not be aware of it. It is far more likely to arise as a result of printed matter being intercepted. Do magazines need to carry a Customs postal declaration form ? There appear to be mixed opinions. If they do then this question will likely become more than a theoretical one very soon after July 1st.
This is not an issue that will only apply to UK organisations as although there is an cross EU threshold of €10,000, many EU organisations with cross EU border membership will exceed this.
It is hoped that there will be more guidance soon at an EU level. If you have had a ruling on this I’d be interested to know the outcome. My guess is that membership organisations will ultimately need to register for VAT in the EU under the OSS. This could of course mean that both UK and EU VAT must be accounted for on the same supply.