VAT – Place of supply changes
A number of significant changes to the VAT treatment of EU cross-border supplies of services came into effect from 1 January 2010. These changes will affect all businesses which supply or receive cross-border services. There are also changes to the process for claiming VAT refunds in EU countries and EC sales lists.
The main changes are as follows:
- Brand new rules for determining the place of supply of services within the EU. These changes significantly extend the reverse-charge mechanism to cover most business to business supplies. This means that in such cases services will be taxable in the EU member state of the customer who will account for VAT using the reverse charge mechanism.
- New reporting obligations for cross-border supplies of services. EC Sales Lists (ESLs) reporting requirements are extended to include most cross-border supplies of services.
- Changes to the ‘time of supply’ rules for ‘reverse charge’ services from the time of payment to the earlier of when the service was completed or when payment is made.
- A new streamlined process for claiming VAT refunds where businesses are charged cross-border VAT. What was known as the ‘Eighth Directive’ refund process has been simplified and an electronic filing procedure has been introduced.