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EU: 2015 Place of Supply Changes - Understanding the changes
From 1 January 2015, supplies of telecommunications, broadcasting and electronically supplied services made by EU suppliers to private individuals and non-business customers will be taxable in the Member State of the customer.
This change is the final phase of the EU VAT Package, which introduced new place of supply of services rules for VAT in the EU and new intra-EU VAT refund processes. The first phase of the VAT Package came into force on 1 January 2010.
The one-stop shop or VAT on e-services (VoES) scheme will also be adjusted to align to the new rules with effect from 1 January 2015.
Identifying the location of a non-taxable customer
The key issue for suppliers will be to correctly identify where their customers belong. This is so they can apply the correct rate of VAT. In order to try to provide both clarity and certainty on this point the regulations contain a number of presumptions which will have legal effect in all 28 EU Member States.
The first step in this process will likely involve determining if any of the presumptions laid down in the implementing regulations apply. There are four sets of conditions which, if met, can be relied upon to determine where a customer belongs:
Supplies in combination with provision of accommodation
Where telecommunication, broadcasting or electronic services are provided in combination with the provision of accommodation in the hotel sector or in sectors with a similar function, such as holiday camps or camping sites the services are deemed to be supplied at the place where the accommodation is located.
If a supplier of telecommunications, broadcasting or electronic services provides services at a fixed location such as:
· a telephone box;
· a telephone kiosk;
· a wi-fi hot spot;
· an internet café;
· a restaurant; or
· a hotel lobby
where the physical presence of the recipient at that location is needed for the service to be provided, the place of supply will be presumed to be that location.
If this is on board a ship, aircraft or train carrying out a passenger transport operation, the country of the location shall be the Member State of departure of the passenger transport operation.
For telecommunications, broadcasting or electronic services supplied via their fixed land line, the presumption shall be that the place of supply is the place of installation of the fixed land line.
For telecommunications, broadcasting or electronic services supplied through mobile networks, the presumption shall be that that the place of supply is the Member State identified by the mobile country code of the SIM card used when receiving those services.
For telecommunications, broadcasting or electronic services, for which the use of a decoder or similar device or a viewing card is needed and where a fixed land line is not used, the presumption is that the place of supply is the place where that decoder or similar device is located, or if that place is not known, the place to which the viewing card is sent with a view to being used there.
If none of the presumptions are relevant then the supplier will need to obtain two pieces of converging evidence from the following list to support where the customer is resident:
a) the billing address of the customer;
b) the Internet Protocol (IP) address of the device used by the customer or any method of geolocation;
c) 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;
d) the Mobile Country Code (MCC) of the International Mobile Subscriber Identity (IMSI) stored on the Subscriber Identity Module (SIM) card used by the customer;
e) the location of the customer’s fixed land line through which the service is supplied to him; and
f) other commercially relevant information.
On-going supplies spanning 1 January 2015
Many suppliers will make continuous supplies of the services affected by the 2015 changes. For example, annual subscriptions or memberships.
Where supplies are made continuously on an on-going basis, the place of supply in respect of each chargeable event that occurs before 1 January 2015 shall be the place where the supplier is established, regardless of when the supply or continuous supply is completed.
The place of supply in respect of each chargeable event that occurs on or after 1 January 2015 shall be the place where the customer is established, has his permanent address or usually resides, regardless of when the supply or continuous supply commenced.
Electronic supplies made via aggregators, mobile phones and market places
It will be necessary for some transactions to be able to correctly identify who is making the supply, in order to confirm who is liable to account for the VAT. Scenarios where this will be the case will include supplies made through telecommunications networks or online market places.
The Implementing Regulation indicates that in such circumstances a service provider which manages a portal or interface or supplies telecommunication services will be treated as acting in its own name unless it is explicitly indicated and can be clearly demonstrated, both in terms of the contract and in the information provided to the customer, that it is some other person that is supplying the service. In effect, the default position is that market place operators (and similar businesses) will need to account for VAT under the new rules.
Rebuttal of the provision is possible if certain conditions are met.
It should be noted, however, that a taxable person that is not an electronic services provider (i.e. where they only provide the processing of payments in respect of electronic services or telephone services provided over the Internet, including voice over Internet Protocol (VoIP)) who does not take part in the supply of electronic services or telephone services cannot fall within these provisions.
As a result, all suppliers should evaluate how they make supplies of their service when using third party agents or market places.