New EU Tax Regulations - Challenge or Opportunity for Service Providers?

From 1 January 2015, telecommunications, broadcasting and electronic services will be taxed in the country where the customer belongs. This applies whether the customer is a business or a consumer and whether the supplier is based in the EU or outside of it. From a business perspective that is either the country where they are registered, or the country where they have fixed premises receiving the service. For a consumer this means the country where they are registered, have their permanent address or normally live. This is a substantial change from current taxation rates which are based on the location of the supplier; hence the new legislation sees taxation migrating from purchase to consumption.

EU Tax Regulations Changing from Purchase to Consumption

This change in taxation is likely to have a major impact on Service Providers who will need to offer accurate visibility of taxation across their billing processes.  The location where the customer belongs needs to be considered, as well as the ability to apply the correct rate of tax. A problem indeed for many service providers who use billing systems that neither recognize nor detail taxation.  Hence these new EU VAT taxation rules will require many service providers to look long and hard at their existing bill provisioning systems.

Growing Roaming Trends In Europe

Whether they are at home or traveling abroad, today’s tech savvy mobile users are increasingly demanding the same services. In their recent announcement Ovum predicts that mobile data will account for more than half of global roaming revenues by 2019. Generating approximately US$50bn in revenue and contributing almost 56% to global roaming revenues. They also suggest that Europe will be the largest contributor to global roaming revenues. Whilst it may cause a few headaches for some service providers this new tax legislation looks to have more benefits for the consumer.

Visibility is Key

Being able to recognize and categorize the taxable components of usage means customers will have a clear view of their charges and be able to apply them to process their taxable returns more appropriately.

It can get rather complicated for service providers – for example where a French customer works in Germany during the week and uses a French SIM card from a service provider. The service provider needs to now send the customer two invoices – one showing usage with French VAT rates and the other showing usage with German VAT rates. However a system which can provide a roaming user with a more holistic view and a complete breakdown of all the variable taxes across countries would not only be very sophisticated – but it would be a very desirable secret sauce for the service providers – and yes this secret sauce does exist!

The Secret Sauce

CTI Group’s Analysis can pull all of the relevant usage and taxation data from the service providers billing systems, thus enabling the service provider to deliver complete online visibility for customers, seeing a full taxation breakdown for usage across all the different tax regions.  Hence the customer is provided with greater clarity and the service provider encounters reduced billing costs

Telco Taxation

In reality this new EU VAT law is designed to prevent companies minimising their exposure to tax but CTI Group’s Analysis turns what could be a problem into a simple solution which delivers benefits for both the service provider and their customers.