B2C 2015 VAT changes

B2C 2015 VAT changes

COUNCIL IMPLEMENTING REGULATION (EU) No 1042/2013

of 7 October 2013

Amending Implementing Regulation (EU) No 282/2011 as regards the place of supply of services

THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the Functioning of the European Union,
Having regard to Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (1), and in particular Article 397 thereof,
Having regard to the proposal from the European Commission,
Whereas:
(1)
Directive 2006/112/EC provides that as from 1 January 2015, all telecommunications, radio and television broadcasting and electronically supplied services supplied to a non-taxable person are to be taxed in the Member State in which the customer is established, has his permanent address or usually resides, regardless of where the taxable person supplying those services is established. Most other services supplied to a non-taxable person continue to be taxed in the Member State in which the supplier is established.
(2)
In order to determine which services must be taxed in the Member State of the customer, it is essential to define telecommunications, radio and television broadcasting and electronically supplied services. In particular, the concept of radio and television broadcasting (hereinafter ‘broadcasting’) services should be clarified, drawing from definitions laid down in Directive 2010/13/EU of the European Parliament and of the Council (2).
(3)
To clarify matters, transactions identified as electronically supplied services have been listed in Council Implementing Regulation (EU) No 282/2011 (3), without the list being exhaustive. The list should be updated, and similar lists should be drawn up for telecommunications and broadcasting services.
(4)
It is necessary to specify who is the supplier for value added tax (VAT) purposes where electronically supplied services, or telephone services provided through the internet, are supplied to a customer through telecommunications networks or via an interface or a portal.
(5)
To ensure the uniform application of the rules governing the place of supply of hiring of means of transport and the place of supply of telecommunications, broadcasting and electronically supplied services, it is necessary to specify where a non-taxable legal person should be considered to be established.
(6)
With a view to determining who is liable for payment of the VAT on the supply of telecommunications, broadcasting or electronically supplied services, and taking into account that the place of taxation is the same regardless of whether the customer is a taxable or a non-taxable person, the supplier should be able to determine the status of a customer solely based on whether the customer communicates his individual VAT identification number. This status must, in accordance with the general rules, be amended if such a communication is subsequently made by the customer. If no such communication is received, the supplier should remain liable for payment of the VAT.
(7)
Where a non-taxable person is established in more than one country or has his permanent address in one country but usually resides in another, priority is to be given to the place that best ensures taxation at the place of actual consumption. To avoid conflicts concerning jurisdiction between Member States, the place of actual consumption should be specified.
(8.)
Rules should be established in order to clarify the tax treatment of the supply of hiring of means of transport and telecommunications, broadcasting and electronically supplied services to a non-taxable person whose place of establishment, permanent address or usual residence is practically impossible to determine or which cannot be determined with certainty. It is appropriate for those rules to be based on presumptions.
(9)
Where information is available to determine the actual location at which the customer is established, has his permanent address or usually resides, it is necessary to provide for a presumption to be rebuttable.
(10)
In certain cases where the service is occasional, habitually involves small amounts and requires the physical presence of the customer, such as the supply of telecommunications, broadcasting or electronically supplied services at a wi-fi hot spot or an internet café, or habitually does not give rise to payment receipts or other evidence of the service provided, as is the case with telephone boxes, the provision and control of evidence with respect to the place of establishment of the customer or his permanent address or usual residence would impose a disproportionate burden, or could pose problems of data protection.
(11)
As the tax treatment of the supply of hiring of means of transport and telecommunications, broadcasting and electronically supplied services to a non-taxable person depends on where the customer is established, has his permanent address or usually resides, it is necessary to clarify, in cases for which no specific presumptions are established or for the rebuttal of presumptions, what evidence the supplier should have to identify the location of the customer. To that end an indicative, non-exhaustive list of evidence should be drawn up.
(12)
In order to ensure the uniform tax treatment of supplies of services connected with immovable property, the concept of immovable property needs to be defined. The proximity required for there to be a connection with an immovable property should be specified, and a non-exhaustive list of examples of transactions identified as services connected with immovable property should also be provided.
(13)
It is also necessary to clarify the tax treatment of the supply of services putting equipment at a customer’s disposal with a view to carrying out work on immovable property.
(14)
For practical reasons, it should be clarified that telecommunications, broadcasting or electronically supplied services provided by a taxable person acting in his own name in connection with the provision of accommodation in the hotel sector or sectors with a similar function should be regarded, for the purpose of determining the place of supply, as being supplied at those locations.
(15)
In accordance with Directive 2006/112/EC, admission to cultural, artistic, sporting, scientific, educational, entertainment or similar events must in all circumstances be taxed at the place where the event actually takes place. It should be made clear that this also applies where tickets to such events are not sold directly by the organiser, but are distributed through intermediaries.
(16)
Under Directive 2006/112/EC, VAT can become chargeable prior to, at the time of or soon after the supply of goods or services. In relation to telecommunications, broadcasting or electronically supplied services supplied during the period of transition to the new rules on the place of supply, conditions linked to the supply or differences in application between Member States could result in double taxation or non-taxation. In order to avoid that, and to ensure uniform application in Member States, it is necessary to lay down transitional provisions.
(17)
For the purposes of this Regulation, it may be appropriate for Member States to adopt legislative measures limiting certain rights and obligations laid down by Directive 95/46/EC of the European Parliament and of the Council (4) in order to safeguard an important economic or financial interest of a Member State or of the European Union, including monetary, budgetary and taxation matters, where such measures are necessary and proportionate in view of the risk of tax fraud and tax evasion in Member States, and in view of the need to ensure the correct collection of VAT covered by this Regulation.
(18)
The concept of immovable property should be introduced in order to ensure a uniform tax treatment by Member States of supplies of services connected with immovable property. The introduction of that concept could have a considerable impact on the legislation and administrative practices in Member States. Without prejudice to such legislation or practices already applied in Member States and in order to ensure a smooth transition, that concept should be introduced at a later date.
(19)

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Implementing Regulation (EU) No 282/2011 should therefore be amended accordingly,
HAS ADOPTED THIS REGULATION

This document of KPMG has nice transactional overviews and explanatory and is an easy read.

Modifications to EU VAT Sourcing Rules

PwC SlideShare - Further guidance on the 2015 European Union B2C VAT changes

The European Commission has clarified the case it is seeking to bring against Luxembourg for charging 3% on ebooks sold online to consumers. This will impact large online ebook retailers, such as Amazon, which are able to sell to any consumers across the EU at much lower rates than their countries.

Two counts of breaching the EU VAT Directive

The details of the referral of Luxembourg is based on two points of law:

1. There is no provision within the EU VAT Directive to levy reduced VAT rates on digital books. It is provided for for printed books, but it would require a unanimous vote by the 28 member states of the EU to harmonise this treatment. It is widely believed that the UK and Germany are against this.
2. Under the conditions of the EU VAT Directive Article 99, member states may only have two reduced VAT rates (plus zero rated goods), and the lower of the two rates cannot be below 5%. Luxembourg VAT is currently charging 3% on e-books.

The EC originally warned France and Luxembourg to raise their ebook VAT rates in October 2012. It gave both countries 30 days to raise their reduced rates on ebooks (3% and 7% respectively) to their national standard rates. Following both countries taking no actions, the EC proceeded with a referral to the European Court of Justice. France was referred to the ECJ on ebook VAT in November 2013.

The above situation will change with the 2015 EU VAT Package. This will shift the ‘place of supply’ for VAT purposes on digital products (such as ebooks, downloads of films or games etc) to where the consumer is based. This will mean that the large online retailer will no longer be able to charge the favorable rates of Luxembourg.

Vertex webcast on VAT changes in 2015

By Chris Walsh and Mark Houtzager

PwC - Small change, big impact

The start of 2015 will bring the biggest single change to the European Union value-added-tax regime that telecom operators, broadcasters and others that provide e-services have seen in decades. The legislation is expected to have a profound impact on e-services providers and particularly on their pricing and commercial strategy.

As providers of these services take steps to adapt to the new legislation, the result will be either a sharp increase in the prices charged to many consumers or a cut in suppliers’ profit margins. Neither of which is a desirable outcome.

Webcast B2C 2015 VAT changes