VAT changes taking place as of 1st January 2015

Suppliers of telecommunication, broadcasting and electronic services in the E.U. might be significantly affected by the changes in VAT law due to take place as of 1st January 2015. The affected taxable persons shall be providing services falling under the following categories:

Telecommunications services refer to services relating to the transmission, emission or reception of signals, words, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, and include:

• Fixed and mobile telephone services, including videophone services.
• Telephone services provided through the internet, including VOIP.
• Voice mail, call waiting, and other call management services.
• Internet access.

Broadcasting services refer to services consisting in audio and audio-visual content such as programmes which are provided via communications networks by and under the editorial responsibility of a media service provider for simultaneous listening or viewing to the general public on the basis of a programme schedule, and include:

• Radio or TV programmes transmitted /retransmitted over a radio or TV network.
• Live streaming of radio or TV programmes

Electronic services refer to services which are delivered over the Internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology, and include:

• Website supply, web-hosting, distance maintenance of programmes and equipment.
• Supply of software and updates.
• Supply of images, text and information and making available of databases.
• Supply of music, films and games, including games of chance and gambling games, and of political, cultural, artistic, sporting, scientific and entertainment broadcasts and events.
• Supply of distance teaching.

Under current legislation, the place of supply of the mentioned services varies on whether the customer is classified as being a taxable or non-taxable person and whether establishment or has his permanent address in or outside the community. The following table provides an indication of the place of supply depending on the type of customer and supplier as indicated:

Hence, currently, the only exceptions to the general rule of supply of services are:

• Supply of services by EU Taxable Persons to Non-Taxable Persons located outside the community,
  • The general rule states that the place of supply of services to non-taxable persons shall be the place where the supplier is established, however in this case, due to Title V Chapter 3 Section 3 Sub section 9 Article 59 (I,j,k), COUNCIL DIRECTIVE 2006/112/EC, place of supply is shifted to where the customer is located.

• Supply of services from Non EU registered suppliers providing services to non-taxable persons located in the community
  • Due to non-taxation or distortion of competition, articles 59(a), Chapter 3 Section 3 Sub-section 9, consider the supply of such services as being in the concerned member state if the effective use and enjoyment takes place within such member state and article 59(b), clearly states that telecommunications services and radio and television broadcasting services, supplied to non-taxable persons who are established in a Member State, by a taxable person who has established his business outside the Community shall deemed to take place in the said member state.

As from 1st January 2015, the directive states that VAT on telecommunications, broadcasting and electronic services charged by a registered taxable person located within the community to non-taxable persons also within the community shall be charged in the member state where the customer is located.

Revised legislation

Following such changes, distortion of competition due to difference in VAT rates should be eliminated. When it comes to VAT on telecommunications, broadcasting and electronic services charges, there will now be no distinction on whether the supplier is an EU or Non EU registered taxable person, as place of supply will depend on where the non-taxable customer is located.

Furthermore, EU and non-EU businesses shall use a web portal in each of the member states they are require to declare the sales and vat due on their supplies depending on their customer base.

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