A fundamental change to the place of supply rules has been approved by Europe.  The change will introduce differing VAT treatment between the long-term and short-term hire of cars.

Baker Tilly analysis

Short term hire is defined as no more than 30 days.  Long term is anything longer than this.

From 1 January 2010, the place of supply of short term car hire will change from where the supplier is established to where the car is put at the disposal of the customer.  This will apply irrespective of whether the customer is a business or an individual.

For long-term hire, if the supply is made to a business customer, VAT will be due in the customer’s Member State.  For supplies to non-business customers, such as individuals, the place of supply will stay as the place where the supplier is established.  However, a further change from 1 January 2013 complicates matters somewhat with the place of supply to non-business customers changing to where the customer is established