Brussels, 04/02/2005 (Agence Europe) - Due to the increase in cross-border activities in the field of services, the Commission has suggested that the place where VAT is applicable be transferred from the Member State in which the service-provider is established to that of the private consumer. This transfer could be possible for certain long-distance services such as passenger transport, catering services, short-term vehicle hire, exhibitions and fairs and cultural events. The Commission hopes to receive reactions to this suggestion to modify the VAT rule by 4 April 2005. The consultation document is available on the Internet site of Directorate General Taxation.
For value-added tax (VAT), the rule provides for an operator providing a service to apply this tax at the rate of the Member State of establishment. However, the growth in cross-border service provision means that it can no longer be guaranteed that the tax ends up in the coffers of the Member State of consumption of the service. In the same way, the development of this kind of service brings with it the risk of competition distortion, because operators providing services in several Member States can localise their activities in the Member States which apply the lowest rates of VAT, or even in third countries.