New Place of Supply of Services rules from 1 January 2010
The European Commission have today, 12 February 2008, announced that ECOFIN has adopted new place of supply of services rules and a new procedure for VAT refunds. For simplicity I’m going to deal with the Place of Supply of Services in this post.
Business to Business supplies of services are the ones affected by the new rules which come into effect on 1 January 2010. According to the press release – the legislation has yet to be published – these services will be taxed in the country of consumption, i.e. where the customer situated. As this is VAT there will, according to the press release, be exceptions. Reading the list of exceptions, however, suggests that there will be little or no change from the current situation for the ‘exceptions.’
Telecoms, broadcasting and electronic services
The new rules will not come into effect for supplies of these services to consumers until 1 January 2015. The press release says:
…these services will be taxed in the country where the consumer is established.
One has to wonder how they will determine where a consumer is established. At a guess I would think they mean the country in which the consumer is normally resident.
Suppliers will be allowed to use a ‘one-stop’ scheme to discharge their VAT obligations. This scheme will allow the supplier to account for VAT in the country in which they are established and not have to register, submit returns or payments in countries in which they have no establishment. The VAT collected by the supplier will be passed to the local VAT authorities, and subsequently transferred to the country where the consumer is situated. The consumer should have been charged VAT at the appropriate rate for their country.
Reading through this part of the press release it has become clear why this is going to take seven years to implement!
If you make business to business supplies there will be a need to ensure you keep up with the new rules. They won’t make a huge difference but there may be changes in the way you have to annotate your invoices and the records that have to be kept.
Related posts:
