EU: 2015 Place of Supply Changes - Overview of the new rules

Relevant Supplies

An EU Implementing Regulation providing further clarity on what the affected supplies are is due to be published in the Official Journal shortly. The Regulation sets out definitions of what is included within each of the three categories of services affected by the changes.  Further detail on these definitions can be found in Appendix A.

Customers

A supply of telecommunications, broadcasting or electronic services can be considered as being made to a non-taxable customer (‘B2C’) where the recipient is established or resident within the EU.

Current position

For EU-based suppliers, B2C supplies of telecommunications, broadcasting and electronic services to customers in the EU are currently treated as supplied where the supplier is established, regardless of where the customer is located.  This means that a UK established supplier accounts for UK VAT on all B2C sales regardless of which EU Member State the customer is resident or established in. For telecommunications and broadcasting services, to the extent that a supplier’s customer enjoys the service outside of the EU, VAT may not be due on this aspect of the supply.

For providers of telecoms and broadcasting services established outside of the EU, B2C supplies of telecoms and broadcasting services are currently treated as supplied where the provider is established (subject to use and enjoyment provisions).  This basic position may be altered to the extent that these services are used and enjoyed within the EU, in which case VAT may be applicable.

B2C supplies of electronically supplied services by suppliers established outside of the EU are treated as made in the Member State of the relevant customer. The existing One-Stop Shop scheme, also known as the VAT on e-services (VoES) scheme, provides affected suppliers with a framework or mechanism to account for any VAT due across these Member States.

The following tables summarise the current position in terms of place of taxation on B2C supplies:

The above position is altered where the effective use and enjoyment of the service would lead to a different tax result.  For example, if an EU supplier is supplying telecoms services to a non-EU customer, the starting point would be that these services would be outside the scope of VAT.  However, if the services are used and enjoyed in the EU, VAT would then become due.

2015 changes

As of 1 January 2015, B2C supplies of telecommunications, broadcasting and other electronically supplied services provided by suppliers in the EU and made to non-taxable customers within the EU will be treated as supplied in the EU Member State where the recipient of the service is established or usually resides.

Suppliers of such services will therefore need to determine where their customers are established or usually reside and will need to account for VAT at the applicable rate in that Member State. This is a requirement irrespective of where the supplier itself is established or registered for VAT.  Therefore, suppliers may (but see alternative below) need to register for VAT in all EU Member States where they have customers.  No minimum thresholds will apply and so making supplies to just one customer in one Member State will trigger a VAT registration requirement in that country. 

As an alternative to obtaining multiple VAT registrations in each Member State where a supplier has a customer, affected suppliers may be able to opt to account for VAT across the EU via a single electronic declaration.  This return can be filed with the tax authority where the supplier is established (the “Member State of identification”).

This system is known as the Mini One-Stop Shop (“MOSS”) scheme. The MOSS scheme will be similar to the one presently in place for non-EU suppliers under VoES and so will allow for the value of B2C supplies made in all 28 EU Member States to be reported on a single electronic return.

Click each item to access specific sections of the 2015 commentary:

• Understanding the changes
• How can an organization prepare?
• Mini One Stop Shop
• How can Deloitte help?