Cross Border Services

Table of Contents

Place of Supply

The place of supply determines where VAT is charged. The EU VAT directive set principles for determining the place of supply. The United Kingdom operates a system which is still very much influenced by the EU directives.

In the case of business to business cross-border services, the place of supply is generally where the business which receives the service is established. This means that where a business established in Ireland renders a service to a business established in France, the place of supply will be France. The recipient will self account for VAT there.

The Irish service provider will not be obliged to charge VAT, because the place of supply is not Ireland. For VAT deduction purposes however the transaction is treated as if it was a zero rate supply.

Receiving Services from Abroad

Where an Irish established business receives a service from a business established in another state whether within the EU or outside the EU, it must self account for VAT. This means that it must charge itself VAT. If it is undertaking a VAT registered business, it should be able to offset this charge against the input (purchase) VAT credit.

If a business recipient is not registered for VAT and receives a supply of a service from abroad, it must register for VAT for this purpose. Equally businesses which undertake a service not subject to VAT such as financial service businesses, must register an account for VAT on services received from outside Ireland.

Equally businesses subject to special treatment such as flat rate farmers and fishermen must register and account for VAT for this purpose. Equally public bodies are obliged to self account for VAT and services received. If they do not already have a VAT number they may be obliged to register for this purpose.

Electronic and Like Services

Where telecommunications broadcasting and electronic services are provided to private persons not acting in the course of business VAT is chargeable in the place with the consumers are resident/established. An electronic service is one provided over the Internet without or with minimal human input dependent on information technology. It does not apply to a transaction of service simply because the Internet is used.

From 1st January 2015 the Mini One-Stop Shop scheme commenced in respect of telecommunication broadcasting and electronic services provided to consumers. The scheme applies to EU established businesses and to businesses outside the EU providing TBE services within the EU. The business may pay and file VAT to one state. For EU businesses this will usually be there home state. For non-EU established businesses they may choose one particular EU state with whom to file.
That state remits VAT to the states in which the consumer is services are provided are resident.
This online system is the Mini One-Stop Shop (MOSS).

The obligations apply in respect of service providers involved in the supply of TBE services. There may be a range of providers involved in the supply of the service

There are rules which assist ascertainment of where the consumer is resident or deemed to be resident. This may be proved for example by the IP the billing addressor a range of other connecting factors. The supplier must gather two non-contradictory pieces of evidence.

One Stop Shop

Since 1 July 2021 the EU One-Stop Shop (OSS) system applies more generally. It applies to supplies of services both by EU established an non-EU established suppliers to consumers in the EU.
There is an EU scheme for EU established suppliers.

There is another scheme for non-EU established suppliers. For EU established suppliers they may register with their own revenue authority. A non-established supplier may register with any revenue authority in the EU.

The scheme applies to all B2C supplies of services within the EU. Unlike the scheme applicable to imports, it is not limited to value of €150.

In the case of business to consumer transactions, the place of supply is generally where the supplier is established. However, there are several important exceptions dependent upon whether the service is rendered to a recipient inside or outside the European Union.

Establishment

Unless the special rules that deem the transaction to be in a particular place because of its nature apply, the most important consideration is where the supplier and the recipient of the service are established. Establishment implies having a base or permanent place of business in that place. It will generally be a sufficient presence to enable the service to be rendered.

For the B2B treatment to apply, there must be a service rendered by a business established in one country to a business established in another. If the service is rendered to or by a local establishment of the same business, then the cross-border treatment may not be available. If, for example the service is rendered by a branch in the recipient state then there is a domestic supply in the recipient’s state. The service is received by a branch in the supplier’s state then there is a domestic supply in the supplier’s state.

In the case of individuals, his or her establishment is based on residence. The residence of a private person determines whether or not there is a cross-border supply.

Services Subject to Special Rules

A range of services are not subject to the general rule due to the nature of the service concerned. The logic of the treatment will be apparent from the nature of the service.

The supply of services connected to immovable property. This refers to services relating to land or buildings. It includes such things as the services of estate agents and solicitors in land related transactions. It includes the letting of land and the provision of accommodation services. It includes construction work and services of persons directly related to the same.

Where such services are provided by a person in a place outside the State, the provider may have to register for VAT there. However in some cases the recipient self accounts in the same manner as a B2B cross-border transaction so that the provider does not need to register in those cases.

Passenger transport services are supplied where they take place.

Admission to cultural artistic sporting scientific educational and entertainment and like services to a taxable person or to a consumer takes place where the event is happening.

Restaurant and catering services are provided where they take place.

Short-term Hiring of vehicles (up to 30 days) takes place where the vehicle is made available to the customer.

Special Use and Enjoyment Rules

The so-called use and enjoyment provisions vary from EU state to state. They deem supply to take place where it is used or enjoyed. The use and enjoyment rules are specifically applicable only to a number of categories of transaction or service. They apply to

the hire or letting of movable goods used in the state to persons located outside the EU
the hire and letting of means of transport used outside the EU; supplied outside the EU
telecommunication broadcasting and electronic services supplied to used and enjoyed by private persons by entities established outside the EU; where the private persons are situate resident
telecommunication broadcasting and electronic services supplied by entities established in the state to persons established outside the EU but used and enjoyed in the state; the place of supply is the state
banking financial and insurance services supplied to private persons resident outside the EU but enjoyed in the state; is the place of supply is the state

B2C Outside EU

Certain categories of service when supplied to nonbusiness private persons resident outside the EU are deemed to be provided outside the EU and accordingly not subject to Irish VAT.

The following services when provided to non-business customers established outside the European Union (EU), the place of supply is outside the EU. In general, no Irish VAT is chargeable on these supplies.

transfers and assignments of copyrights, patents, licences, trademarks and similar rights
advertising services
the services of consultants, engineers, consultancy firms, lawyers, accountants and other similar services, as well as data processing and the provision of information
obligations to refrain from pursuing or exercising, in whole or in part, a business activity or a right
banking, financial and insurance transactions including reinsurance, except for the hire of safes
the supply of staff
the hiring out of movable tangible property, with the exception of all means of transport
the provision of access to, and of transport or transmission through, natural gas and electricity distribution systems. This includes the provision of other services directly linked thereto
telecommunications services
radio and television broadcasting services
electronically supplied services.

The supplier must obtain proof that the private non-business customer is resident outside the European Union. This will require checking the address associated with the customer.

Recovery of VAT Abroad

As is the case with goods, a business which is not registered for VAT in the State may recover VAT incurred in the State or in other states in the course of its business. The EU VAT rules provide for a mechanism to apply for a refund through the home country’s revenue where they are not registered for VAT in the state concerned.

For businesses established outside the EU the centralised EU system is not available. They must apply individually to the relevant relevant revenue authority to prove they are a business and prove that they incurred VAT in the course of that business, which would be deductible if they had been carrying out business in that EU state.

Deductions are only available in respect of the business which would have a right to VAT deduction/reclaim if it was carrying on a business in their state. Therefore businesses which are exempt from VAT may not reclaim VAT incurred in other EU states.