Place of Supply of Services Rules

Changes as from 1st January 2015

What’s Changing?

VAT Department

3rd September 2014

MINISTRY FOR FINANCEVAT Department, Centre Point Building,16, Ta’ Paris Road, Birkirkara, Malta

• Historical background leading to the changes of 2015

• Which are the affected services?

• What impact will the new rules have?

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MINISTRY FOR FINANCEVAT Department, Centre Point Building,16, Ta’ Paris Road, Birkirkara, Malta

Historical background leading to the changes of 2015

•Before 1st January 2010, services across the EU were in general taxed at the place of the supplier.

•In December 2007 political agreement was reached that in principle, the rules must be changed.

•Council Directive 2008/8/EC amending the main VAT Directive (2006/112/EC), published on the 12th February 2008

•Transposed to the Malta VAT Act (3rd Schedule) as per Legal Notice 133/2009

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MINISTRY FOR FINANCEVAT Department, Centre Point Building,16, Ta’ Paris Road, Birkirkara, Malta

Council Directive 2008/8/EC provides that:

•From 1-1-2010, services supplied business to business (B2B) would be taxed at the place of the customer (this was relatively easy due to the reverse charge rule)

•From 1-1-2015, as per article 58 of the VAT Directive, certain services supplied business to consumer (B2C) would also be taxed at the place of the customer

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MINISTRY FOR FINANCEVAT Department, Centre Point Building,16, Ta’ Paris Road, Birkirkara, Malta

New article 58 of the VAT Directive from 1-1-2015:

The place of supply of the following services to a non-taxable person shall be the place where that person is established, has his permanent address or usually resides:  (a) telecommunications services; (b) radio and television broadcasting services; (c) electronically supplied services, in particular those referred

to in Annex II. 

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MINISTRY FOR FINANCEVAT Department, Centre Point Building,16, Ta’ Paris Road, Birkirkara, Malta

The effects of Council Directive 2008/8/EC mean that for:

•Telecommunications, broadcasting and electronic services

• Supplied for B2B and B2C

• Within and outside the EU

1 January 2015: in all the cases taxation at the place of the customer

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MINISTRY FOR FINANCEVAT Department, Centre Point Building,16, Ta’ Paris Road, Birkirkara, Malta

Definition – Telecommunication

Art 24(2) of the VAT Directive

• Telecommunications services shall mean services relating to the transmission, emission or reception of:

Signals, words, images and sound information of any nature

•Detailed examples in article 6a of Implementing Regulation 282/2011/EU

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MINISTRY FOR FINANCEVAT Department, Centre Point Building,16, Ta’ Paris Road, Birkirkara, Malta

Definition – Broadcasting

Art 6b(1) of the VAT Implementing Regulation

• Broadcasting services shall include services consisting: audio and audio visual content provided to the general public via network editorial responsibility of a media service provider simultaneous listening or viewing

•Non-simultaneous viewing (such as video on demand) not covered

•Relevant for different VAT rates in different Member States

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MINISTRY FOR FINANCEVAT Department, Centre Point Building,16, Ta’ Paris Road, Birkirkara, Malta

Definition – Electronically Supplied Services

Art 7(1) of the VAT Implementing Regulation

Services over the internet or electronic network Minimal human intervention

•Wide list of examples in Annex I of the Regulation

•Communication via an electronic mail does not mean that the service is electronically supplied

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MINISTRY FOR FINANCEVAT Department, Centre Point Building,16, Ta’ Paris Road, Birkirkara, Malta

Definitions and lists of examples:

- VAT Directive (2006/112/EC)

- VAT Implementing Regulation (282/2011/EU)

Some provisions need to be read together (especially for electronic services)

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MINISTRY FOR FINANCEVAT Department, Centre Point Building,16, Ta’ Paris Road, Birkirkara, Malta

Definitions – (cont.)

Lists of examples: non-exhaustive; where possible priority given to positive lists:

Telecommunications - Positive - Art 6a(1) of the VAT Implementing Regulation - Negative - Art 6a(2) of the VAT Implementing Regulation

Broadcasting - Positive - Art 6b(2) of the VAT Implementing Regulation - Negative - Art 6b(3) of the VAT Implementing Regulation

Electronic services - Positive - Annex II of the VAT Directive + Art 7(2) and Annex I of the VAT Implementing Regulation - Negative - Art 7(3) of the VAT Implementing Regulation

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MINISTRY FOR FINANCEVAT Department, Centre Point Building,16, Ta’ Paris Road, Birkirkara, Malta

Impact of the new rules

Expected impact for the business

•For B2B supplies, it will be the same, i.e. where the customer is established:

• For B2C, it will change - place of the customer:

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MINISTRY FOR FINANCEVAT Department, Centre Point Building,16, Ta’ Paris Road, Birkirkara, Malta

Impact for Malta and other Member States

•Maltese suppliers will collect VAT of other Member States for customers established in other Member States

•The VAT revenue from Maltese consumers would be collected by foreign operators where these are not established in Malta

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MINISTRY FOR FINANCEVAT Department, Centre Point Building,16, Ta’ Paris Road, Birkirkara, Malta

Why the new rules had to enter into force only in 2015

• Requirement to know the client and his location

• Need to introduce MOSS in order to reduce the administrative/business burdens

• Profound changes for the business concerned

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MINISTRY FOR FINANCEVAT Department, Centre Point Building,16, Ta’ Paris Road, Birkirkara, Malta

For further detailed explanation:

•Very extensive explanatory notes published by the Commission

•Not legally binding but enjoying a very wide consensus among the Member States

• May be accessed at:

http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/telecom/explanatory_notes_2015_en.pdf

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Explanatory noteson

the EU VAT changes to the place of supply of telecommunications, broadcasting and

electronic services that enter into force in 2015

MINISTRY FOR FINANCEVAT Department, Centre Point Building,16, Ta’ Paris Road, Birkirkara, Malta

Thank You

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MINISTRY FOR FINANCEVAT Department, Centre Point Building,16, Ta’ Paris Road, Birkirkara, Malta