Brussels, 07/12/2004 (Agence Europe) - The Ecofin Council noted that no agreement had been reached on review of the sixth VAT directive concerning the place where services are rendered. The proposal aims to amend the place where taxes are paid for services rendered by taxpayers on behalf of other persons liable to tax. This will no longer be the place where the service provider is established, but the place where the person receiving the service is established. Laszlo Kovacs, Taxation Commissioner, noted the great differences between Member States on this. The Commission's proposal would raise a major problem for Germany, essentially when it comes to vehicle hire services. Austria, speaking through its spokesperson, criticises the Germany position. Luxembourg still has reservation about the date when the directive should take effect (1 January 2006 in the Commission's proposal).
The need to have the taxation rule assessed is due to the increase in cross-border services within the internal market. According to the new system, the main rule consists in making the service receiver, rather than the service provider, responsible for paying value added tax (VAT) on services provided. This rule would be modelled on that governing VAT application for goods provided to a company established in another Member State, but would comprise some exemptions for services attached to real estate (services provided by real estate firms, passenger transport, cultural and artistic, cultural, sports and leisure activities and hotels and catering). The proposal is part of the Commission's strategy aimed at improving the way the VAT system works in the internal market. The dossier is being passed on into the hands of the Luxembourg Presidency.