VAT changes impacting UK businesses selling to EU

From 1 January 2025 the EU have made the following VAT changes, which may impact UK businesses selling goods or services to EU customers:

1. The EU has extended the scope of member states to use VAT reduced rates (RR), a rate below the standard rate. Every EU member state will have the right to RR two products or services with a rate of 5% or more. The range of potential goods or services has been expanded and the restrictions which applied to those member states who recently joined the EU has been removed. It is likely that several member states will introduce additional reduced rates throughout 2025.

2. The EU has amended the VAT "place of supply" of live digital events to private consumers (b2c) to where the customer belongs, rather than where the event takes place. If a UK provider streamed a live event held in the UK to EU private consumers in 2024, it would charge 20% UK VAT (if not within the VAT Education exemption) and have no obligation to register in the EU. In 2025 the UK education or entertainment online provider will need to either register for VAT in the EU customers member state or use the EU wide One Stop Shop (OSS) to charge and declare local VAT. UK businesses with no EU establishment must register immediately that such a sale takes place and cannot take advantage of the local VAT registration threshold. There is no change to the existing VAT treatment of equivalent b2b sales.

For further information, please speak with our Indirect Tax Services team here.