Skip to main content

  • AddRemove
  • Build a Report 
Legal Update

EU Commission Clarifies New VAT Place-of-Supply Rules for Telecommunications, Broadcasting and Electronic Services

27 May 2014
Mayer Brown Legal Update

The European Union is currently acting at the forefront of developments around the (indirect) taxation of businesses in the digital economy. Effective 1 January 2015, for VAT purposes, the place of supply of “digital services” to non-taxable customers will be the country where the customer is established, and therefore local VAT will be charged by the supplier on these supplies. In parallel, a “Mini One-Stop Shop” (MOSS) will be introduced to allow suppliers of digital services to electronically file a single VAT return and pay all the VAT collected in different EU countries in one Member State.1

The EU Commission has worked on guidance regarding the new place-of-supply rules applicable to digital services; Explanatory Notes on the matter were issued on 3 April 2014. The Explanatory Notes are neither binding nor exhaustive, but they do provide some interesting information for businesses on how the new rules will be applied. A summary of significant points is provided here below.

Scope: Telecommunications, Broadcasting and Electronic Services

Like the implementing regulation from which they derive, the Explanatory Notes reiterate that the new rules do not apply to the digital economy at large, but target only “telecommunications, broadcasting and electronic services.” However, the Explanatory Notes seek to justify the use of “open-ended lists” in the new rules by the need to target innovative types of services that might emerge in the future. Unfortunately, this approach leaves the door open for legal uncertainty.

Determining the Customer’s VAT Status

The Explanatory Notes clarify that suppliers of digital services can primarily rely on the VAT identification number provided by their customers to determine their VAT status. Where no VAT identification number has been provided, the supplier may regard the customer as a non-taxable person, unless there is information to the contrary. However, if the supplier receives the VAT identification number afterwards, necessary adjustments will have to be made (e.g., reimbursement of VAT and/or adjustments in the VAT return). Indeed, the nature of the customer (i.e., taxable or non-taxable person) directly influences the VAT liability of the supplier.

Determining the Customer’s Location

Under the new rules, suppliers will need to determine each customer’s location, as this will govern, among other things, the applicable VAT rate.

Considering that the customer’s location can be difficult to determine, the Explanatory Notes provide some practical examples on how the specific rebuttable presumptions available under the new regime may apply. One of the presumptions concerns “digital supplies at a physical location of the supplier”; this covers, e.g., the case where a fee is paid by the customer to use the Internet in an Internet café. In such situation, the applicable VAT will be the country where the Internet café is located.

Electronic and Telecommunications Services Supplied by an Intermediary

The Explanatory Notes provide particularly helpful guidance with regard to the supply of electronic and telecommunications services through an intermediary. Where telecommunications and electronic services are supplied to a final consumer, it is the supplier of the services who is liable to pay the VAT to the tax authorities of the country where the consumer is located. However, the business model of electronic and telephone services is, in essence, multiplayer, so it is often difficult to identify who is actually supplying the end-consumer (and, hence, who will have to apply the new rules). Under the new rules, there is a general presumption that where an intermediary takes part in the supply, that intermediary is deemed to have received and onward-supplied the service. The presumption is not applicable when an intermediary provides services that are not sufficiently relevant in order for it to be seen as taking part in the supply (e.g., merely processing a payment).

The Explanatory Notes provide extensive business models, business flows and decision trees that help to clarify who the supplier of the service to the final consumer would be.

Transitional Measures

The new rules represent a paradigm shift in the application of VAT to supplies of digital services. As such, there is a need for measures to cover transitional situations. Where a chargeable event occurs before 1 January 2015, the place of supply will be where the supplier is established (i.e., applying the old rules). Under the transitional measures, this will also be the case where a payment on account is made before 1 January 2015. To avoid abuse, the Explanatory Notes clarify that this transitional measure is only applicable in situations where payments are made in the normal course of the supplier’s business. Any chargeable events occurring, or any payment made, on or after 1 January 2015 will be subject to the new rules and VAT will be chargeable by the supplier in the country where the customer is established.

What Is Next?

The Explanatory Notes are a guidance tool to be used to clarify the practical application of the new place-of-supply rules for supplies of telecommunications, broadcasting and electronic services. With less than five months to go before the opening of the MOSS VAT registration process, companies should consider their operations and assess how and where they will be operating after 1 January 2015. The time has come for action.


1 For more information on the background, see


  • Astrid Pieron
    T +32 2 551 5968
  • Charles-Albert Helleputte
    T +32 2 551 5982

The Build a Report feature requires the use of cookies to function properly.  Cookies are small text files that are placed on your computer by websites that you visit. They are widely used in order to make websites work, or work more efficiently.  If you do not accept cookies, this function will not work.  For more information please see our Privacy Policy

You have no pages selected. Please select pages to email then resubmit.