The place of supply of B2C TBE services is where the consumption of the services takes place. Therefore, VAT will need to be charged at the place where the final consumer is “established” (if it is a legal person) or at the place where he has his “permanent address” or “usually resides” (when the customer is a natural person). On this ground, it is very important to be clear on the meaning of these three concepts.
Additionally, B2B TBE services are also taxed where the recipient is established. However, in this case, the reverse charge mechanism applies. Therefore, the supplier of the TBE services is not oblige to charge any VAT, hence no need to bother how to collect and remit the VAT to the tax authorities.
Status of the customer as a taxable person (Art. 18(1) Implementing regulation)
The supplier may regard his customer as an EU taxable person – and therefore not charge VAT since reverse charge mechanism will apply – where:
- the customer has communicated his individual VAT identification number to him (which has to be validated by the supplier); or
- the customer has not yet received an individual VAT identification number but informs the supplier that he has applied for it and the supplier obtains any other proof which demonstrates that the customer is a taxable person or a non-taxable legal person required to be identified for VAT purposes
Status of the customer as a non-taxable legal person (Art. 18(2) Implementing regulation)
In case the supplier does not receive a VAT identification number from his customer, the latter will be considered as a non-taxable person (i.e. B2C transaction).
With regard to B2C TBE services the place of supply is in the country where the final costumer is established (non-taxable legal persons), has his permanent address or usually lives (natural persons). For that reason, it is key to have the 3 definitions clear from a legal point of view:
- Place of establishment of a non-taxable legal person (Art. 13a Implementing regulation): “… the place where the functions of the business’s central administration are carried out”) or has a fixed establishment “… the place of any other establishment characterized by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to receive and use the services supplied to it for its own needs”
- Permanent address (Art. 12 Implementing regulation): “… the address entered in the population or similar register, or the address indicated by that person to the relevant tax authorities, unless there is evidence that this address does not reflect reality”.
- Usually reside (Art. 13 Implementing regulation): “… the place where that natural person usually lives as a result of personal and occupational ties. Where the occupational ties are in a country different from that of the personal ties, or where no occupational ties exist, the place of usual residence shall be determined by personal ties which show close links between the natural person and a place where he is living”.
- Establishment in more than 1 country or with an addressing one country but actually residing in another: Priority is to be given to the place that best ensures taxation at the place of actual consumption. To avoid conflicts concerning jurisdiction between Member States, the place of actual consumption should be specified.
Rules based on presumptions (which can be rebutted) are established where the above 3 types of establishment/residence is practically impossible to determine or which cannot be determined with certainty. Those presumptions are:
- B2B or B2C TBE services provided at a location such as a telephone box, a telephone kiosk, a wi-fi hot spot, an internet café, a restaurant or a hotel lobby (services which need the physical presence of the customer for the service to be supplied) will be taxable at the place of that location (Art. 24a(1) Implementing regulation).
EXCEPTION (Art. 24a(2) Implementing regulation): when the above mentioned services are supplied on board a ship, aircraft or train carrying out a passenger transport operation effected within the EU, the country of the location shall be the country of departure of the passenger transport operation.
- Presumptions applicable to the following B2C TBE services (Art. 24b Implementing regulation):
- fixed landline (taxable at the place of installation)
- through mobile networks (taxable in the country identified by the mobile country code of the customer’s SIM card)
- use of a decoder or viewing card (taxable at decoder location or the viewing card is sent)
- other circumstances will be taxable at the place identified by the supplier on the basis of two items of non-contradictory evidence (see changes below as of 1 January 2019). To that end an indicative, non-exhaustive list of evidence has been drawn up in Art. 24f Implementing Regulation:
- the billing address of the customer;
- the Internet Protocol (IP) address of the device used by the customer or any method of geolocation;
- bank details such as the location of the bank account used for payment or the billing address of the customer held by that bank;
- the Mobile Country Code (MCC) of the International Mobile Subscriber Identity (IMSI) stored on the Subscriber Identity Module (SIM) card used by the customer;
- the location of the customer’s fixed land line through which the service is supplied to him;
- other commercially relevant information.
The burden to collect two non-contradictory pieces of evidence is particularly onerous for small and medium-sized companies. Therefore, from 1 January 2019, for those businesses supplying B2C TBE services in the EU below EUR 100,000 (EU-wide threshold) one item of evidence provided by a person involved in the supply of the services other than the supplier or the customer will be sufficient.
Rebuttal of presumptions (Art. 24d Implementing Regulation)
A supplier may rebut a presumption on the basis of three items of non-contradictory evidence indicating that the customer is established, has his permanent address or usually resides elsewhere.
A tax authority may rebut presumptions where there are indications of misuse or abuse by the supplier.
Relevant documents and links:
Council Implementing Regulation (EU) No 282/2011 (with regard to the status of the customer)