The 2015 changes
With effect from 1 January 2015, the VAT rules for B2C supplies of electronic services will change. The place of taxation of such services, when supplied to non-business customers within the EU, will shift from the country where the supplier of the services is established to the Member State where the customer receiving the services is located.
As a result, the VAT rules and rates in the country of establishment of the service provider will no longer be relevant. Going forward, business supplying e-services to customers throughout the EU will be required to charge VAT on their services at the VAT rate applicable in their customer's EU Member State, unless such services classify as VAT exempt in that country.
What does this mean for businesses operating in the Financial Services sector?
Electronic services are services which are delivered over the internet or an electronic network, the nature of which renders their supply essentially automated and involving minimum human intervention. They include services such as those automatically generated from a computer via the Internet in response to specific data input by the recipient, and online information generated automatically by software from specific data input (such as legal and financial data) by the customer.
Financial Services providers which offer certain online services (such as operators offering online trading or investment platforms, electronic banking, etc.) may be impacted by the 2015 VAT changes. As operators, you should be thinking about:
- Whether your services classify as "electronic services";
- The location of your customer and the measures you will need to
take to identify their location; and
- Whether your services classify as VAT exempt in those
jurisdictions or whether VAT is due on the supplies you make (and
if so, which VAT rate applies).
How can Deloitte help?
There are many issues for businesses to consider both pre and post 2015. In the first place, we can assist you in determining whether, and to what extent, your services would be impacted by the change in rules.
If your business will be impacted by the changes, we can provide guidance and assistance specific to your business, including, advising on the compliance considerations and any system changes that may be required in order to adapt to any changes to the VAT treatment of your services.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.