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Amendments to VAT place of supply rules on services

The Change

As from 1 January 2015 the place of supply (i.e. where vat is due) of certain services will change.

These will come into force by a decision of the Council Directive 2006/112/EC and amended by

Directive 2008/08.

The change in the place of supplies rules will ONLY affect the sales transactions done between a

vat registered seller (business) to non vat registered buyer (consumer). Such transactions are often

referred as B to C.

Business to Business (B to B) transactions will not be affected by this change.

 

Which services will be affected?

• Telecommunications (e.g. fixed & mobile telephone, internet access)

• Electronic supplied services (e.g. website/page hosting, automated maintenance of

programmes, online data warehousing, software downloads, search engines, banner ads,

music/movie downloads, game downloads, automated online games, remote gaming).

 

Place of supply rules on these type of services as from 1 January 2015

MALTA CO  -  B to B; B to C  -  Business/Consumer (Maltese)  =  Place of Supply Malta  

                                              NO CHANGE

 

MALTA CO  -  B to B  -  Business EU (Vat Registered)  =  Place of Supply Seller's country   

                                              NO CHANGE

 

MALTA CO  -  B to C  -  Consumer EU (Non Vat Registered)  =  Place of Supply Buyer's country  

                                                CHANGE

 

Implications & considerations of the amendments (B to C transactions)

• The seller should start charging the Vat of the customer's country.  This will mean charging different vat rates according to the vat rates of each country.

Member stateStandard Vat rate (%)Member stateStandard Vat rate (%)
Austria20Italy22
Belgium21Latvia21
Bulgaria20Lituania21
Croatia25Luxembourg15
Cyprus18Malta18
Czech Rep.21Netherlands21
Denmark25Poland23
Estonia20Portugal23
Finland24Romania24
France19.6Slovakia20
Germany19Slovenia22
Greece23Spain21
Hungary27Sweden25
Ireland23UK20

 

• Thus the seller other than Malta should register for vat also in each EU customer's country and should comply with the vat obligations (including paying vat) of each country.  A simplified online solution was designed by the EU to avoid multiple vat registrations and facilitate the compliance requirements.  This should be submitted on a quarterly basis.

• Existing contracts with customers might need to be amended.

• Details of clients must be more accurate and updated to establish in which country the clients are situated.

• There will be more compliance cost in order to abide with VAT requirements of different countries.  One should consider if commercially still makes sense to trade B to C transactions.

• How will these changes impact pricing and profits?  Would you introduce variable pricing according to where your customers are established?

 

The change in a practical example:

MALTA CO            Electronic supplied services to consumer(s)          Italian Non vat registered consumers            PLACE OF SUPPLY

                                                                                                                                                                                =

                                                                                                                                                              ITALY i.e. Charging Italian Vat

 

Some solutions to minimize the impact

• Obtain accurate information about your clients that are based within EU.  Such details should include an EU valid vat number if any.

• Amend your IT systems if your billing is issued automatically to your clients.  Remember that different vat rates should be charged according to where your EU clients (B to C transactions) are established.

• Obtain advice about the vat rates of your customers' country and if any exemptions apply.

• Make use of the EU vat reporting system (MOSS) through the Malta Vat e-id services for compliance.

• Start preparing for these changes from now.

 

How can 3a help

• Provide assistance to help you understand the changes of the Vat rules.

• Assistance with the setup of the e-id Vat services and MOSS system.

• Preparing and submission of the MOSS declarations on a quarterly basis.

• Guide you during the whole process of implementation

 

For more information, kindly contact:

Clive Farrugia - Director: This email address is being protected from spambots. You need JavaScript enabled to view it.  or

Christian Vella - Director: This email address is being protected from spambots. You need JavaScript enabled to view it.