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Cross Border VAT Changes 2010: Place of supply of services

Business-to-Business Supplies

For the supply of business-to-business (B2B) services, VAT will typically be due where the customer is established instead of where the supplier is established, as is the current position. Notable exceptions to the basic rule are as follows:

  • Services connected with immovable property will continue to be the place where the immovable property is situated.
  • Cultural, sporting, scientific, educational services, and restaurant and catering services will all continue to be taxed where the services are physically carried out.
  • The short-term hire of a means of transport will be taxed at the place where the means of transport is actually put at the customer’s disposal.

Business-to-Consumer Supplies

For the supply of business-to-consumer (B2C) services, VAT will generally be due where the supplier is established. In addition to the B2B exceptions noted above, there are also the following notable B2C exceptions:

  • Electronic services supplied by a vendor not established in the EU will continue to be considered to be supplied where the consumer is established (thus obliging the supplier to account for local VAT).
  • Electronic services supplied by a vendor established in the EU to consumers outside the EU will continue to be considered to be supplied where the consumer is established. Supplies to consumers within the EU will continue to be where the vendor is established.
  • Certain “intellectual” services supplied to consumers outside the EU will continue to be considered to be supplied where the consumer is established.

New procedure VAT refunds for non- established businesses

For businesses with no establishment in the EU, the existing recourse to the 13th Directive remains. For businesses with an establishment in the EU, the mechanism for obtaining VAT refunds will change. The key measures, aimed at simplifying the process, are as follows:

  • Extension of time to submit claims (September 30 instead of June 30).
  • Electronic claims instead of paper claims.
  • Central filing via a portal in Member state of establishment rather than applying to each Member state of refund.
  • Apparent removal of the requirement to submit original paper copies of invoices with claims (although Member states may request “additional information” which may include “submission of the original or a copy of the relevant invoice or import document”).
  • A requirement on Member states to pay interest on delayed refund payments.