From the 1st of January 2015 the new VAT order will begin to apply to B2C electronic services providers due to directive 2008/8/EC of the European Commission. The specified services will start to be taxed in the country where the recipient of the service is located.
Which electronic services will taxation change for?
The changes affect services enabling the use of internet and electronic network and services provided via the internet and electronic network. Such services are for example web administration, sale and maintenance of electronically transmittable software, sale of electronically transmittable music, films, books and games. The changes do not include goods sold over the internet.
What does a provider of electronic services have to consider?
The provider of electronic services must ascertain the location of the user of the service also when providing a service to private persons and persons without liability for value added tax.
The service will be taxed in the country, where the location or residence of the recipient of the service is.
Specified services will not be taxed for persons located outside the European Union, this will be done by the country of location of the recipient of the service.
In case the location of the purchaser of the service is not known it will be determined on the basis of the invoice address and bank account, from where the service has been paid for.
If the service is provided by way of a landline telephone, the location of the client is the location of the installation of the phone.
How must a provider of electronic services act?
A provider of electronic services has two options in light of the given changes: to register itself as a person liable for value added tax in all Member States, where the location of the recipient of the service is or to apply the special order in their country of location. In case the service provider wants to apply the special order, the service provider must declare and pay the value added tax to the tax authority in their country of location and the administrator will transfer the respective sum in turn to the tax authority of the country of location of the recipient of the service. Value added tax must be accounted according to the value added tax rate in force in the respective Member State.
To get additional information contact the accountants of 1Office Estonia on the number +372 631 1118 or write to contact@1office.ee.
