VAT on Supplies of Services to the EU
December 2014 Tax Alert
By Sam Hornbrook and Hana Straight
As part of BEPs and its impact on VAT/GST, the European Union (“EU”) place of supply of services in respect of Value Added Tax (“VAT”) on telecommunications, broadcasting and electronic services is changing from January 2015.
From 1 January 2015, when a New Zealand business (which is not established in the EU) makes supplies of telecommunications, broadcasting or electronic services to individual customers (not businesses) within the EU, VAT should be returned by the New Zealand business in the country where the customer belongs.
Currently this rule only applies to electronic services made to individual customers, with telecommunications and broadcasting services provided to individuals subject to EU VAT in the country where the service is used and enjoyed.
Many EU countries have nil VAT registration thresholds, which require VAT registration as soon as a single supply is made.
Therefore, if your business is making supplies to individual customers in the EU and the supplies made could fall into the headings of telecommunications, broadcasting or electronic services, it is worth considering the application of EU VAT, if you have not already done so.
As an alternative to multiple VAT registrations across a number of EU countries, suppliers are able to opt to account for VAT across the EU via a single electronic return. This system is known as the Mini One-Stop Shop (“MOSS”) scheme. Under this scheme, non-EU suppliers only need register for VAT in one European country, regardless of how many EU countries they make supplies in. The elected country collects all the VAT due for all the countries in the EU and distributes this to the other EU countries. So the non-EU supplier only needs to lodge one GST/VAT return, but in that return they need to have sufficient information to identify the supplies made in each of the different EU countries.
In order to determine what country the VAT is due in, a “know your client” exercise needs to be undertaken. This will assist in determining which recipients are businesses customers and which are individual customers.
There are certain presumptions regarding the location of individual customers that are allowed to be made where the supplies are:
- made in combination with the provision of accommodation (presumed to be supplied where the accommodation is located);
- where the services are provided at a fixed location(s) (presumed to be supplied at that location); via a fixed land line (presumed to be supplied at the place of installation); via mobile networks (presumed to be supplied in the country with the mobile country code attributed to the card / country of issue) and viewing cards (presumed to be supplied in the country where the device is located or the viewing card is sent with a view to be used there).
If the services don’t fall into one of these presumptions then two pieces of evidence from the following list are required:
- The billing address of the customer;
- The IP address of the device used by the customer;
- Bank details such as the place where the bank account used for payment is and the billing address of the customer held by that bank;
- The Mobile Country Code of the International Mobile Subscriber Identity stored on the SIM card used by the customer;
- The location of the customer’s fixed land line through which the service is supplied to that customer; and
- Other commercially relevant information.
If you need further guidance on your EU VAT registration obligations, please contact your Deloitte tax advisor.
December 2014 Tax Alert contents
- Inland Revenue’s 2014 Annual Report: some reading between the lines
- Briefing for the Incoming Minister of Revenue
- New Zealand Revenue Minister releases update on taxation of multinationals
- The Commissioner’s power of reconstruction: No day at the beach for taxpayers
- What are the tax compliance issues that Inland Revenue is focusing on?
- VAT on Supplies of Services to the EU