RD215 - ETNO Reflection Document on EC consultation: VAT - The place of supply of services to non-taxable persons

The EU Commission has in 2004 made proposals for the place of supply rules for VAT purposes to be amended for B2B transactions, and has recently made similar proposals for B2C transactions.

The B2B changes are generally seen as positive whereas, whilst the reasons for the B2C changes are understood, they are for ETNO less welcome because these will bring increased costs and difficulties of compliance. ETNO has difficulty agreeing to the proposals for two reasons: (1) Firstly the higher VAT rated countries generally welcome the sort of change proposed whereas the lower VAT rated countries do not. (2) Secondly, suppliers of B2C services would have to identify where their customers belong and charge VAT according. Suppliers would thus have to charge VAT at 25 or more rates if they provide services to consumers in all EU countries. In addition to that, although collection is in one member state (for onward distribution to member states of consumption), suppliers have to have regard to the particular VAT rules in all member states to be compliant. Hence the proposals are seen as being unduly onerous.