VAT COMMITTEE Guidelines

The following Guidelines have been approved for publication following review by the EU Commission Services of Guidelines agreed from the meetings of the VAT Committee held on 19 June 2002 and 8 January 2003.

Meeting number 65 19 June 2002

Articles 8 and 9 - Place of supply of goods and services rendered by undertakers

Delegations agreed almost unanimously that the services supplied by the undertaker in the framework of organising a funeral should be considered as composite elements of a single service, although it still has to be determined on a case by case basis.

Furthermore delegations also agreed unanimously that the place of supply of this single service would be where the undertaker is established, in accordance with Article 9(1) of the 6th VAT Directive.

Article 12(3)(a) - VAT rates applicable to CD-ROMs

The delegations unanimously agreed that electronic media including text or spoken word were not included in Annex H, category 6.

Articles 11 and 13(B)(d)(3) -Taxable amount when goods are purchased by credit card

All delegations agreed that in circumstances where goods are sold at a given price irrespective of how payment is to be made and where a customer paying by credit card was required to pay a card-handling fee to an associate of the retailer, this fee was in principle, ancillary and subordinate to the main supply and would thus take on the same VAT liability.

Meeting number 67

Article 9 and Annex L -E-Commerce. Electronically supplied services

The Delegations agree unanimously that a television or radio programme that is broadcast over the Internet or similar electronic network and is simultaneously broadcast over a traditional radio and television network (i.e., by wire or over the air, including by satellite) is radio and television broadcasting within the penultimate indent of Article 9(2)(e) of the Sixth Directive. Conversely, a program that is broadcast only over the Internet or similar electronic network, is an electronically supplied service under the last indent of Article 9(2)(e).

The Delegations agree unanimously that distance teaching is an electronically supplied service within the meaning of the last indent of Article 9(2)(e) when it is automated and dependent on the Internet or similar electronic network to function and its supply requires little or no human involvement. Where the Internet or similar electronic network is used as a tool simply for communication between the teacher and student (e.g., e-mail), this will not be viewed as an electronically supplied service.

The Delegations agree unanimously that a non-established taxable person who is taxable under the special scheme provided for under Article 26C, may cease to qualify for the special scheme under that Article at anytime throughout a calendar quarter where any of the criteria for exclusion are satisfied. The non-established taxable person is required to submit any outstanding return up to the end of the calendar quarter in which they were excluded. The requirement to submit this return has no effect on the requirement, if any, for the non-established taxable person to register under the normal procedures in a Member State immediately upon exclusion from the special scheme.

The Delegations agree unanimously that where a non-established taxable person declares and remits an amount of VAT to the Member State of Identification, who in turn distributes the amount to the Member State of Consumption, and the Member State of Consumption subsequently realises that the amount is too high, the Member State of Consumption will advise the Member State of Identification of the adjustment and send the overpayment directly to the non-established taxable person. The Delegations also agree unanimously that where a non-established taxable person remits, in relation to the declaration, an overpayment of VAT to the Member State of Identification, this Member State will return the overpaid amount directly to the non-established person.

The Delegations agree unanimously that each reporting period of a non-established taxable person to the Member State of Identification under the special scheme set out in Article 26C, is treated as an independent, closed reporting period.

The Delegations agree unanimously that, in respect of returns made under the special scheme set out in Article 26C, the Directive does not permit the rounding of amounts to the nearest whole monetary unit (e.g., Euro) and that the exact amount of VAT must be reported and remitted in accordance with the Sixth Directive.

The Delegations agree unanimously that where potential sellers obtain the right to list an item for sale on a website (e.g., an online market place) in exchange for a fee (e.g., a listing fee and/or a success fee), potential buyers bid for the item on the website via an automated process, the parties are notified by an automatically computer generated e-mail in the event of a completed sale and the buyer and the seller ultimately complete the sale, the service provided by the website operator (e.g., the operator of the online market place) is considered to be an electronically supplied service under the last indent of Article 9(2)(e). Such supplies may well constitute, at least in part, web-hosting services.

The Delegations agree unanimously that the attached Guide to Interpretation and accompanying tables set out the guidance on what is meant by “electronically supplied services” for purposes of the last indent of Article 9(2)(e) of the Sixth VAT Directive.

Annex

“Electronically Supplied Services”

Guide to Interpretation

Introduction

This document sets out guidance on what is meant by “electronically supplied services” and will help businesses decide whether their services fall within the place of supply rules for such services (as per the last indent of Article 9(2)(e) of the Sixth VAT Directive). This document only addresses the place of supply issue.

The attached tables give examples of transactions that are either included or excluded from the definition of “electronically supplied services”. Supplies of goods or supplies of services that are excluded from the definition are treated in accordance with other place of supply rules.

What is an “electronically supplied service”?

An “electronically supplied service” is one that:

• In the first instance is delivered over the Internet or an electronic network (i.e., reliant on the Internet or similar network for its provision); and then
• The nature of the service in question is heavily dependent on information technology for its supply (i.e., the service is essentially automated, involving minimal human intervention and in the absence of information technology does not have viability.).

Therefore, on the basis of this two step test, an “electronically supplied service” includes:

• Digitised products generally, such as software and changes to or upgrades of software; or
• A service which provides, or supports a business or personal presence on an electronic network (e.g., web site or web page); or
• A service automatically generated from a computer, via the Internet or an electronic network, in response to specific data input by the customer; or
• Services, other than those specifically mentioned in Annex L, which are automated and dependent on the Internet or an electronic network for their provision.

Telecommunications and radio and television broadcasting services, covered respectively in the ninth and penultimate indents of Article 9(2)(e) of the Sixth VAT Directive, are not regarded as electronically supplied services for purposes of this Directive.

In general, the use of the Internet or other electronic networks by parties to communicate with respect to transactions or to facilitate trading does not, any more than the use of a phone or fax, affect the normal VAT rules that apply. For example, where parties simply use the Internet to convey information in the course of a business transaction (e.g., e-mail), this does not change the nature of that transaction. This differs from a supply that is completely dependent on the Internet in order to be carried out (e.g., searching and retrieving information from a database with no human intervention).

In all instances, electronically supplied services will be taxable at the standard rate established by a Member State (in accordance with Article 12(3)(a) of the Sixth Directive), unless an exempting provision in a Member State applies. For example, when considering the supply of gambling, if the supply in the traditional manner is exempt in a Member State, it would also be exempt if it constituted a supply of an electronically supplied service.

The attached tables illustrate the above approach by classifying a range of supplies to provide clear examples of those that are regarded as being electronically supplied services and those that are not. This Guidance is not intended to be exhaustive.

Supplies shown as excluded are treated in accordance with other place of supply rules. Particular care should be taken where a service includes both electronic and other elements. Such composite transactions must generally be considered on a case-by-case basis.

Table 1

Table 2