VAT rules change for overseas suppliers

A fundamental change to the place of supply rules has been approved by Europe. The change will mean that the basic place of supply for supplies to overseas businesses will be the place where the customer is established. The change will take place from 1 January 2010.

Baker Tilly analysis

In reality, for businesses that make supplies such as advertising, consultancy and advisory services, this change will not affect them as these supplies are currently taxable where the recipient is based.  However, for supplies of services that are currently taxable where the supplier is established e.g. management and clerical services, from 1 January 2010 VAT will not be chargeable by the supplier.  Instead, the customer will account for the VAT due in their Member State using the reverse charge procedure.

There will still be some exceptions to the default rule.  For example, services relating to land, admissions to cultural and educational events and catering services will all have their own specific place of supply rules.

Businesses will need to ensure their systems are fully in place by 1 January 2010 to enable them to charge VAT correctly and comply with administrative requirements across Member States e.g. invoicing requirements and the need to submit quarterly EC Sales Lists for services.