One of the major questions facing foreign entrepreneurs engaging in multinational trade is where should their transaction be taxed. This seemingly simple question brings along many more issues, as different country might mean a completely different VAT rate as well as requirement to complete various duties enforced by law. European Union has brought along much convenience for entrepreneurs, however cautious approach is still required as inappropriate measures might cause unpleasant consequences.
Defining place of supply of services
As a rule place of supply of services defines country where service is taxed. As a general rule place of supply of services in case of B2B is country of buyer of services, however there are special rules in certain cases, e.g.:
- For services involving immovable property – location of property.
- For transport (of passengers) services – place where transport takes place with travelled distance taken into account.
- Admission services for events of cultural, artistic, sport, etc. nature – place where event takes place.
- For catering and restaurant services – place where services are provided.
- For short term rental of means of transport – place where means of transport are handed over to service recipient.
The above refers to the situation where recipient of services is a taxpayer for the VAT purposes, however if the recipient is not a taxpayer, place of supply of services is defined as place where service provider has business establishment or fixed establishment. There are also special rules in case of services involving:
- Immovable property – location of property.
- Transport of goods – place where transport takes place with travelled distance taken into account. In case of transport beginning and ending in two different member countries place of supply of services is defined as place where transport of goods began.
- Cultural, artistic, sport, etc. services – place where services are performed in reality
- Catering and restaurant services – same as above.
- Short term rental of means of transport – place where means of transport are handed over to service recipient.
- Tourism/travel services – place where service provider has a business establishment or in case of not having one – place of residence.
- Telecommunication, electronic services – place of residence of service recipient.
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