There have in fact been a few changes made as part of an EU-wide package introduced in what is being called the ‘VAT Package’ that came into effect on 1st January, and comprising four elements: changes to the rules for the supply of international services; revised and new reporting requirements; revised procedures for claiming overseas VAT; the enhancement of cooperation arrangement between EU tax authorities.
The first element relates to the ‘Place of Supply’ rules, which many of you will have come across already. These are broadly designed to ensure that VAT is not paid by customers from different EU countries, and have worked reasonably well in achieving that to date. The main thrust of the change involves services being supplied across EU borders, whereupon the business to business service will now be taxed where the customer is established (check Notice 741 for details of how to determine establishment (Notice 741): It’s a relatively complex subject that needs to be considered and understood by businesses providing such services; more details of the changes can be found at HMRC.
From 1st January 2010 therefore, partly as a result of the change, no VAT should now be charged for services supplied to:
- any non-EU businesses
- any VAT-registered person in any non-UK member state
- any business (whether VAT-registered or not) in any non-UK member state
There is a requirement to ensure that the business being traded with is a business by obtaining letters or other documents from their tax authority or Chambers of Commerce.
The second element relates to EC Sales Lists (form VAT101). These will now have to be submitted quarterly for the supply of services to other EU countries, a big change from before; the supply of goods to other EU countries will continue to be reported on form VAT101 but now monthly instead of quarterly. The time allowed to submit these forms is also reduced to 14 days from 42.
The third of the new elements was covered in our August 2009 article
