For defining the place of supply of services it is necessary for the supplier to establish if the customer is a taxable customer or not. There is a difference between customers that are established within the EU and those that are not.
As pointed out above, if the customer is a taxable person the general rule is that services are taxable in the country where the customer is established. On the other hand, if the customer is a non-taxable person, the main rule is that the services are taxable in the country of the supplier except for certain intellectual services supplied to non-EU customers.
An EU customer is a taxable person if:
– the customer has provided his VAT number and the supplier obtains confirmation of the validity of the VAT number and of the associated name and address; or if
– the customer has applied for VAT registration and the supplier obtains any other proof which confirms that the customer is a taxable person; and the supplier carries out a reasonable level of verification of the accuracy of the information.
In case when no VAT number is provided an EU costumer may be considered as a non-taxable person. In this respect, by applying the general rule the supplier shall levy local VAT on the services fees.
A non-EU customer is a taxable person if:
– the customer provides to the supplier a certificate issued by the competent tax authorities that the customer is engaged in economic activities in order to enable him to obtain a refund of VAT under 13th Directive; or if
– no such document is available the customer should provide to the supplier a VAT number or any other proof that the customer is a taxable person, and the supplier carries out a reasonable level of verification of the accuracy of the information provided by the customer.
Therefore, it is recommendable that companies keep evidence about the checks they have made for confirming the taxable status of their customer end respectively for not levying VAT on the services provided to foreign businesses.
The Regulation clarifies certain aspects and raises new questions. Obviously, it will be subject to future amendments before it reaches a VAT bible status. If and when that happens, discussions may be well advanced on whether the Directive shall be included in the Regulation as an ultimate step for unification of the VAT rules.