VAT Place of Supply for Services

Taxable supplies

S. 4(2) of UK Value Added Tax Act 1994 defines a taxable supply as a supply of goods or services made in the UK other than an exempt supply. S.31 (1) of the states that a supply of goods or services is an exempt supply if it is of a description for the time being specified as such under various Group headings in Schedule 9 to the Act. The group headings are as follow:

Group 1:

Land

Group 2:

Insurance

Group 3:

Postal services

Group 4:

Betting, gaming and lotteries

Group 5:

Finance

Group 6:

Education

Group 7:

Health and welfare, charities, local authorities and public bodies

Group 8:

Burial and cremation

Group 9:

Subscriptions to trade unions, professional and other public interest bodies

Group 10:

Sport, sports competitions and physical education

Group 11:

Works of art, etc

Group 12:

und-raising events by charities and other qualifying bodies

Group 13:

Cultural services, etc admission to museums, exhibitions, zoos and performances of cultural nature supplied by public bodies and eligible bodies

Group 14:

Supplies of goods where input tax cannot be recovered

Group 15:

Investment gold and precious metals

A person making exempt supplies but no taxable supplies is not a taxable person and cannot be registered for VAT in the UK.

Place of supply - Goods

Determining the place of supply for goods depends on whether the goods were supplied with transport or without transport.

Supplies with transport

Where goods are dispatched or transported by the supplier, the customer or a third person, the place of supply is deemed to be the place where the goods are located at the time when dispatch or transport of the goods to the customer begins. But if dispatch or transport of the goods begins outside the VAT territory of the EU, both the place of supply by the importer liable for payment of VAT and the place of any subsequent supply is deemed to be the EU country importing the goods.

Supplies without transport

Where goods are not dispatched or transported, the place of supply is deemed to be the place where the goods are located at the time when the supply takes place.

Place of supply - Services

Place of supply for services assumes considerable significance because for VAT purposes where the place of supply of any services is in an EU country, that supply is liable to VAT in that country and in no other country. If that country is not the UK, the supply is outside the scope of UK VAT. Where the place of supply of any services is outside the EU, that supply is not liable to VAT in any EU country.

The basic rule of place of supply for services is that supply of services between businesses (B2B services) is in principle taxed in the country where the customer is established while services supplied to private customers (B2C services) are taxed in the country where the supplier is established.

If you are based in the UK and the place of supply of your services is held to be in the UK you will need to charge and account for VAT according to UK VAT rules. But if you are in the UK and the place of supply of your service is held to be in another country then you do not need to charge UK VAT.

BUSINESS TO BUSINESS (B2B) TRANSACTIONS

The general rule for B2B transactions is that VAT is applicable according to the laws of the country where the customer is based. The business customer does not necessarily have to be VAT registered in their respective member state but it must be ‘in business’. A VAT registration number is considered an appropriate evidence to demonstrate the customer’s business status. If the customer is not a business customer the transaction will be treated as a B2C transaction. The exceptions to the B2B general rule are summarised below:

Services

Services connected with immovable property

Place of supply

Where the land is situated

Supplies of admission to cultural, artistic, sporting, scientific, educational and entertainment events

Where performed

Short term hire of means of transport (up to 30 days for vehicles, up to 90 days for vessels)

Where put at the customer’s disposal

Passenger transport

Where transport takes place proportionate to the distance covered

Restaurant and catering services

where physically carried out

Restaurant and catering services supplied on ships, planes and trains (EC transport only)

Point of departure

BUSINESS TO CONSUMER (B2C) TRANSACTIONS

The general rule for B2C is that place of supply for services will remain where the supplier is established. However, there will be various exceptions to the general rule as summarised below:

Services

Services connected with immovable property

Place of supply

Where the land is situated

Services and ancillary services connected with cultural, artistic, sporting, scientific, educational, entertainment or similar activities

Where performed

Short term hire of means of transport (up to 30 days for vehicles, up to 90 days for vessels)

Where put at the customer’s disposal

Long term hire of means of transport

Supplier’s location until 31 December 2012. Thereafter where customer is established

Passenger transport

Where transport takes place proportionate to the distance covered

Restaurant and catering services

Where physically carried out

Restaurant and catering services supplies on ships, planes and trains (EC transport only)

Place of departure

Intermediary services

Same place as the underlying transaction

Intra-community transport of goods

The place of departure

Ancillary transport services

Where transport takes place proportionate to distance covered

Services of valuation or work on goods

Where performed

Non-EC to EC electronically supplied services

The customer’s member state

EC to non-EC intangible services

Non-EC customer’s country

Intra-EC cross border supplies of telecoms, broadcasting and electronically supplied services

From 1 January 2015 where customer belongs. This will require registration in the customer’s member state or the use of a new One-Stop Scheme.

VAT Place of Supply for Services