Brussels, 23/12/2003 (Agence Europe) - On Tuesday, the European Commission presented a proposal to change the place of supply of services for Value Added Tax (VAT) purposes where the customer is a trader (business to business). The proposal would shift taxation in most cases from the place where the supplier is established or has a fixed place of business to the place where the customer is located. However, there would be exceptions to this general rule for certain services for which special arrangements currently exist (e.g. services related to immovable property and transport services), so as to avoid imposing disproportionate administrative burdens upon certain traders. "Cultural, artistic, sporting, entertainment or similar services would continue to be treated as supplied, and therefore taxable, where the services are physically carried out. Again the existing rule generally results in taxation where consumption occurs. Services that are tangible in nature, such as restaurant services, are obviously supplied for immediate consumption at a readily identifiable location so it is appropriate for the supplier to apply VAT", notes the Commission.
"The Internal Market, globalisation, deregulation and technology change have all combined to create enormous changes in the volume and pattern of trade in services in Europe" commented Frits Bolkestein, European Commissioner for Taxation and the Internal Market. "This proposal will make the application of VAT to services acquired by business simpler and fairer, balancing the need to minimise administrative obligations for traders with the control needs of tax administrations."
The Commission has announced that it is in the process of preparing another proposal, to be unveiled in 2004, on services to individuals.