Europe - VAT on telecommunications

The Council today reached political agreement1 on two draft directives and a draft regulation aimed at changing the rules on value-added taxation (VAT) so as to ensure that VAT on services accrues to the country where consumption occurs, and to prevent distortions of competition between member states operating different VAT rates.

The new rules will require taxation for VAT on business-to-business supplies of services at the place where the customer is situated, and no longer at that where the supplier is located, as is currently the case.

For business-to-consumer supplies of services, the place of taxation will continue to be that where the supplier is established. However, in certain circumstances, the general rules for both businesses and consumers will not be applicable, and specified rules will apply to reflect the principle of taxation at the place of consumption. These exemptions concern in particular restaurant services, the hiring of means of transport, cultural, sporting, scientific and educational services, and business-to consumer supplies of telecommunications, broadcasting and electronic services.

Source : By 3wan.net(3wan.net), dated 03/12/2007