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Steve Allen, Director of VAT Advisers Ltd, provides a timely reminder about some forthcoming important VAT changes

Introduction

With the end of 2009 fast approaching, we thought it would be useful to remind everyone of the arrival of the EU VAT Package on 1 January 2010, and give a short summary of its content and implications. 

The VAT Package will introduce fundamental changes to the VAT system across the EU through the introduction of:

• changes to the 'place of supply' rules for services
• a requirement to complete EC Sales Lists for taxable cross-border supplies of services
• changes to the way in which 8th Directive refunds are made

In short, if the new compliance obligations are not fulfilled, previously recoverable VAT could be lost, and fines and penalties possibly incurred. However, if handled properly, the VAT Package could be an opportunity for businesses to make some significant VAT-related savings.

Place of Supply Rule Change

For Business to Business (‘B2B’) services, the ‘basic rule’ for determining the place of supply changes on 1 January 2010 from ‘where the supplier is established’ to the place ‘where the customer is established’ (Business to Customer supplies (‘B2C’) remain as ‘where the supplier is established’).  

The B2B place of supply of ‘where performed’ supplies, such as work done on goods and services relating to training and conferences, will remain unchanged until 1 January 2011, when it too will change to ‘where the customer belongs’ (note that related B2C supplies will also change on that date to ‘where the event takes place’). 

B2B supplies of telecoms, broadcasting, and electronically supplied services are already ‘where the customer is established’, but related B2C supplies will remain ‘where the supplier is established’ until 1 January 2015, when they too will change to ‘where the customer is established.’

It should be noted that the place of supply of land-related services will continue to be ‘where the land is located’ (for both B2B and B2C).

EC Sales Lists for Services

From 1 January 2010, EC Sales Lists will also need to be completed for intra-EU taxable supplies of B2B services which are subject to the ‘reverse charge’ (i.e., supplied ‘where the customer is established’). This is a new obligation for EU businesses, and a key part of the EU’s anti-fraud drive.

8th Directive Claims – Going Electronic

From 1 January 2010, the current paper-based procedures for making 8th Directive claims will be replaced by fully electronic procedures which will require claimants to seek VAT refunds through portals operated by their own Member States. This will at least eliminate the need for claims to be made in the language of the Member State making the refund.