Report of the findings of PwC's 2015 Impact and Readiness survey conducted in September 2014, with some commentary.

1. www.pwc.co.uk
Results of PwC’s 2015 Impact and Readiness survey
The 2015 changes
Time is running out
On 1 January 2015, the place of supply of
telecommunications, broadcasting and electronically
supplied services to private individuals located in the EU
will change. We test the scale of the impact and the
readiness of the affected businesses.

3. Contents
Overview
1
Mini One Stop Shop (MOSS)
3
Preparation for the 2015 changes
5
Impact of the changes
7
Presumptions
9
Evidencing customer location
11

4. 1 PwC
Overview
Small change, big impact
The start of 2015 will bring the biggest
single change to the European Union
value-added-tax regime that telecom
operators, broadcasters and others that
provide e-services have ever seen.
On 1 January 2015, the place of supply of
telecommunications, broadcasting and electronically
supplied services to private individuals located in the EU
will change; from where the supplier is established, to the
Member State in which each customer ‘belongs’. This change
to the basic place of supply means that businesses will have
to identify where each customer belongs; and understand
how each Member State in which the customers belong will
treat the sale of affected services .
The EU legislation, which has been enacted but takes
effect from 1 January 2015, is expected to have a profound
impact on e-service providers (i.e. telecommunications,
broadcasting and Electronically Supplied Services),
particularly on their pricing and commercial strategy. As
providers of these services take steps to adapt to the new
legislation, we have conducted a 2015 Impact and Readiness
survey to gauge the impact and test how prepared this
community of businesses is for these changes.
83 Businesses participated
in the survey
Respondents profile
Although businesses from across all sectors and territories
were invited to respond, the majority of respondents came
from the Electronically Supplied Services (“ESS”) sector.
This high proportion of those involved in ESS is perhaps
a reflection of the commercial and technical complexities
that continue to be some way from resolution in this space,
thereby necessitating a greater level of engagement in the
‘2015 process’ from those involved, even at this late stage.
Equally it may simply be a reflection of the fact that there
are a greater number of businesses in the ESS space than, for
example, in the more consolidated world of telecoms.
What type of services do you supply? (Please tick all that apply)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Telecoms 30%
Broadcasing 14%
ESS 77%
Unclear 6%
Businesses participated
in our survey

5. The 2015 changes – Time is running out. 2
Geographical profile
Whilst the geographical profile of respondents is perhaps
inevitable, it may also be a reflection of a more limited
awareness and understanding of the 2015 changes outside
the EU which undoubtedly exists, despite the best efforts of
the EU Commission and others to publicise the changes and
encourage compliance.
Role in the Supply chain
Undoubtedly the number of respondents, the nature of the
supplies, the location of the business and its place in the
supply chain, are all factors which influence the outcome of
a survey of this nature. However, we feel there is a sufficient
cross section in all of the key categories to ensure that the
results of our survey are representative.
Where is your business based?
88%
EU 12%
Non EU
Which of the below best describes the role of your business in
affected supplies to customers? (Please tick all that apply)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Direct sales 74%
Sales via intermediaries 32%
Intermediary 18%
Payment processor 22% EU Non EU

6. 3 PwC
Mini One Stop Shop (MOSS)
The success of the Mini One Stop
Shop (“MOSS”) is critical to the
successful implementation of a
location (as a proxy for consumption)
basis for taxation in the EU, if
Member State tax authorities are to
encourage compliance.
If successful, the MOSS scheme is also likely to pave the way
to a broader one stop shop scheme for all supplies within
the EU.
The EU Commission and Member States have worked hard
to resolve any divergence in views amongst them and to
agree on a method of implementation that is workable for
Member States and, as far as possible, minimises the impact
on the taxpayer. Doing so inevitably has involved a degree
of compromise and as businesses have dug into the practical
operation of the scheme, some wrinkles have become
apparent and concerns expressed.

7. The 2015 changes – Time is running out. 4
If you are not planning to use MOSS, why? If ‘undecided’ please
detail why in the ‘Other’ box
For those that have made a decision not to use
MOSS, the underlying rationale for the most part
appears to be commercial, but it is also clear that
some of the procedural rules around MOSS and
the associated audit of taxpayers affairs does also
seem to have been influential in decision making.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Fixed establishment 30%
in EU
Existing registrations
in EU 17%
Adjustment
procedures 3%
Disclosure of
information 5%
Concerns 8%
around audit
Other 37%
(please specify)
Are you planning to use the MOSS simplification for post-2015
compliance?
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Yes 53%
No 21%
In part 10%
Unclear 16%
The legislation on when MOSS can and cannot
apply may also have driven behaviour – for
example, the existence of a single VAT registration
(without an establishment) in the EU prevents a
non-EU business using the MOSS scheme.
In light of this it is perhaps not surprising that
whilst over half of our respondents intend to
use the MOSS scheme, there are a number
of businesses that are, at this late stage, still
undecided as to what to do.
MOSS, why not?
Some of the other reasons specified by the respondents
are as follows:
‘Main focus on single Member State’
‘Global structure to be finalised’
‘Expected classification as a payment processor’
‘Huge investment for low results’
‘Exemption from EU VAT’
‘Unclear still as to tax at point of consumption or
residency’
‘Application of Article 24a’

8. 5 PwC
Preparation for the 2015 changes
Given that our Survey was conducted
only some 3 months before the rule
changes bite, it is not surprising that
many of our respondents regarded
themselves in a healthy state or
preparedness. However, there are still
a significant proportion who it seems
feel unprepared, or insufficiently
prepared to deal with the changes
come 1 January 2015.
Throughout the process of drafting the Implementing
Regulation and the accompanying Explanatory Notes, the
EU Commission has taken great care to consult widely with
Member States, affected businesses and the indirect tax
advisory community to ensure that the legislation is fit for
purpose and, as far as possible, to minimise the burden on
taxpayers. The net result of this is that the development of
this legislation has involved a high degree of consultation
between businesses and tax authorities.
As at today, how well prepared are you for the changes? (Please
rank from 1-10, with 10 being as prepared as possible)
0% 10% 20% 30%
1 4%
2 3%
3 7%
4 4%
5 14%
6 10%
7 18%
8 24%
9 10%
10 6%

9. The 2015 changes – Time is running out. 6
In some respects, this resulted in practical workarounds
(such as the proxies for customer location) being enshrined
in law, but in others some less than ideal rules that were
often a product of compromise between Member States.
It is notable that whilst our respondents have had some
engagement with tax authorities in the Member State of
consumption, this is understandably less than they have had
with their ‘home’ tax authority. It will be interesting to see
to what extent this balance of interaction is maintained once
returns have been submitted and auditing begins.
Have you engaged with any of the following in respect of your
supplies / compliance obligations? (Please tick all that apply)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
EU Commission 30%
Local tax authority 54%
Others in your
supply chain
67%
Other Member State
tax authorities 31%
Supplier under Article 9A and reliance on 3rd
parties for customer information & impact of
the changes
Article 9A is a widely drawn provision that seeks
to simplify the VAT accounting on complicated ESS
supply and distribution chains. It is therefore perhaps
not surprising, especially given our respondent profile,
that a large number of respondents are expecting to be
treated as the supplier to the consumer by virtue of the
provision but the proportion of businesses captured is
an illustration of how broad the practical application of
the provision is.
The 40% of respondents relying on third parties
for providing customer location information,
demonstrates how ‘remote’ ESS supplies can be from
their customer in the modern world.
51%
Expect to be treated
as a supplier under
article 9A
40%
Will rely on a third
party to obtain
information about
their customers

10. 7 PwC
Impact of the changes
The 14% of respondents who indicated that the
2015 changes may result in a business migration
demonstrates that the ramifications of the 2015 can
go beyond tax compliance and associated system
configuration issues and drive significant commercial
change. It would appear that some businesses are
taking the opportunity to reorganise their affairs
within the EU. Such reorganisations may also be driven
by the removal of the financial benefit of being located
in a low VAT rate Member State post 2015. The playing
field will be levelled for the affected industry sectors
such that the VAT compliance obligations will be the
same agnostic of the location of the business.
14%
Expect the changes to
cause a migration of
their businesses to
another EU member
state or to a location
outside the EU
Will the changes cause a migration of your business to another
EU member state or to a location outside the EU?
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Yes 14%
No 86%

11. The 2015 changes – Time is running out. 8
Please rank from 1-10 the impact of the changes on the following factors
(10 being the most impacting):
4 4.5 5 5.5 6 6.5 7 7.5 8
Scope of changes 5.94
Technical VAT aspects 6.63
Impact on the customer 4.83
Ongoing compliance 6.23
Obtaining necessary
information
6.24
Commercial impact 5.01
Communications and
training
5.25
Regulatory issues 5.87
IT systems 7.54
Transitional factors 5.32
We asked respondents to rank the impact
of the changes in particular areas, which
based on our experience of advising clients,
were the most likely to cause issues. Not
surprisingly the highest ranking impact
was on IT systems. It is also interesting to
note that getting to grips with the technical
rules in each of the Member States is
presenting some challenges. Ongoing
compliance and obtaining the necessary
evidence to support customer location also
clearly presents some challenges, but it is
surprising that the impact on the customer
ranked relatively lowly in our survey –
perhaps the ‘remote’ nature of customer
interaction of many of the impacted
services – particularly in the ESS space –
makes price and other changes easier to
manage, and reduces the perceived impact.
The scores above illustrate the average scale of impact of each of the factors
identified by the respondents.

12. 9 PwC
The EU legislation provides in certain circumstances, for the
customer location to be presumed to be a particular location
as a matter of law. These presumptions were introduced to
ease the burden on businesses.
It is interesting to note that the lesser debated location based
presumption features surprisingly high in our survey. Given
the higher proportion of respondents in the ESS sector, the
most popular and potentially more complicated presumption
to be used, is that based on 2 pieces of evidence. It is also
clear that some businesses will be providing more than one
affected category of supply and as such will need to utilise
more than one of the presumptions in the business.
Which of the presumptions listed below are most likely to apply
to your supplies? (Please tick all that apply)
0% 10% 20% 30% 40% 50% 60% 70%
SIM card presumption 31%
Decoder presumption 4%
Fixed line presumption 19%
2 pieces of non-contradictory
evidence 53%
Location based presumption 43%
On board passenger transport 3%
Presumptions
Where applicable, the common consensus in the
industry has been that the decoder, mobile SIM card
country code, and location based presumptions
would be the most straightforward means for a
business with relevant supplies to identify the place
of supply. However, the fact that 13% of respondents
intend on using 3 pieces of evidence to rebut another
presumption suggests that this might not always be
the case.
87%
Are not planning to
rebut any of the
presumptions
Are you planning to rebut any of the presumptions above?
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Yes 13%
No 87%

13. 10
The 2015 changes – Time is running out.

14. 11 PwC
Evidencing customer location
If you are planning on using 2/3 pieces of evidence to identify
customer location what pieces of evidence will you be using?
(Please tick all that apply)
0% 10% 20% 30% 40% 50% 60% 70%
Billing address 64%
IP address 61%
Bank details 41%
SIM card 22%
Fixed line 14%
Other commercially 42%
relevant information
What other commercially relevant information are you
intending on using?
(Please tick all that apply)
0% 10% 20% 30% 40% 50% 60% 70%
Unique payment 29%
mechanisms
Consumer trading
history 31%
Gift card point of sale 10%
Country-locked gift
cards 8%
42%
Documentation of
third-party payment
service providers
Customer self- 48%
certification
Other (please specify) 8%
The options as to which evidence respondents might be
using to support customer location where one of the other
presumptions does not apply were those specifically included
by way of example in the Implementing Regulation. As such,
many respondents will be utilising billing address and IP
address – perhaps because these are indirectly ‘endorsed’
by the EU Commission as suitable pieces of evidence in the
Regulation, but also perhaps because such information is
often core to the operation of a consumer services business
and as such is readily available. Concerns around the
potential for manipulation of an IP address voiced by various
parties during the consultation does not seem to have
deterred businesses from using it.
The 40% of respondents who indicated that they would be
using other commercially relevant information in support
of customer location were given the option of choosing
types of evidence that were highlighted in the explanatory
notes and/or indicating other types of evidence that they
were proposing to use. It is notable that a high proportion of
respondents propose to use customer self certification as a
means of evidence. Our experience is this is often likely to be
used as a corroborator of other evidence rather than primary
evidence but this may not of course always be the case. It is
worth remembering that whilst the Regulation only requires
commercially relevant information, there is no threshold
test as to the quality of the information – with the only
legal requirement on taxpayers appearing to be that they
can demonstrate its commercial relevance to the supply in
question. As such whilst an email address might be regarded
by some as less than robust in isolation, there is nothing
preventing a taxpayer from using it in this context provided
its relevance can be justified in the context of the supply and
the other corroborating piece of evidence used.

15. The 2015 changes – Time is running out. 12
Our respondents of the survey have highlighted the
following as significant challenges that they are
faced with whilst preparing for the 2015 changes. As
highlighted by the size of the images below, changes
to the IT systems, including billing and other and the
rules regarding evidencing customer locations are
the few that feature on top of the list in our survey.
ERP
Price changes Proportionality
Legal
IT systems
Training
Local rules
Compliance
Evidencing
customer
location
Infrastructure
Invoicing Billing & other

16. Legal/copyright text and reference number
Martin Blanche
E:martin.j.blanche@uk.pwc.com
T:+44 (0) 20 7213 8347
Johnathan Davies
E:johnathan.c.davies@uk.pwc.com
T:+44 (0) 20 7212 1208
Huma-Awan Haigh
E:huma-awan.haigh@uk.pwc.com
T: +44 (0) 20 7212 3639
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