Cross-border VAT: the new one-stop shop

The place of supply rules govern where a particular supply takes place, and therefore determine where businesses are obliged to register, collect and remit Value Added Tax (VAT) due on their supplies and in which member state.

There are important changes to the VAT place of supply rules affecting cross-border services from 1 January 2015. These changes will affect those businesses based both inside and outside the EU which are involved in the supply of telecommunication services, television and radio broadcasting services and businesses involved in electronically supplied services (e-commerce business) where the customer is a consumer, i.e a private individual or an organisation that is not in business, such as certain charities and public bodies, which are not registered for VAT and make no business supplies (a B2C supply).

Currently, where the supplier has an establishment in the EU, the place of supply of these services is the jurisdiction where the supplier is established. This enables the supplier to charge VAT at a uniform rate, relevant to its location, to all non-business clients, wherever they are based. The use and enjoyment rule, if applied by a member state, can override this for telecommunications and broadcasting services by providing that where a supply is enjoyed and consumed in the EU, by a consumer who would otherwise be treated as belonging outside the EU, VAT must be charged in the jurisdiction where the service is used and enjoyed. (The use and enjoyment rule similarly applies where the recipient of the supply belongs in the EU but the service is consumed outside the EU)…

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