VAT when providing services to the EU-customer

Buying services from another EU country
If you buy and receive services for business purposes from another EU country, you must declare and pay VAT on the transaction as if you had sold the services yourself, at the applicable rate in your country (using the reverse charge procedure).
You can usually deduct this amount later on when you make your VAT declaration.

Selling services to the final consumer in another EU country

You must usually charge your customers VAT at the rate that applies in your country, except for telecommunications, broadcasting and electronic services, which are always taxed in the customer's country (where a private person has a permanent address or usually resides, or where a non-taxable person is established).

Selling services to businesses based in another EU country

If you sell services to businesses based in another EU country you don't usually need to charge your customers VAT. Your customers will pay VAT on the services received at the applicable rate in their country (using the reverse charge procedure).

You may still deduct the VAT that you paid on related expenses, such as for goods or services purchased specifically to make those sales.

Be aware that there are several important exceptions to the rules.

Supply of services

On 1 January 2010, rules were introduced to ensure that VAT on services will better accrue to the country of consumption [see Directive 2008/8/EC adopted by the EU Council of Ministers and the press release IP/08/208 ].

To ensure more uniform application, certain aspects of these rules have been clarified through implementing measures which have applied directly since 1 July 2011 (see Implementing Regulation No 282/2011 adopted by the Council and the Council press release on page 13). The Commission on 18 December 2012 proposed to amend the Regulation to make the taxation of electronic services more business friendly as of 1 January 2015. See the press release and the proposal.

The place of taxation is determined by where the services are supplied. This depends not only on the nature of the service supplied but also on the status of the customer receiving the service. A distinction must be made between a taxable person acting as such (a business acting in its business capacity) and a non-taxable person (a private individual who is the final consumer).

The concept of a taxable person covers anyone who independently carries out an economic activity, even if that person is not identified for VAT purposes, but it also includes a non-taxable legal person identified for VAT purposes [Article 43 of the VAT Directive].

Only once the exact nature of the service and the status of the customer are known can the place where the services are supplied be correctly determined.

The supply of services between businesses (B2B services) is in principle taxed at the customer's place of establishment, while services supplied to private individuals (B2C services) are taxed at the supplier's place of establishment.

B2B services [Article 44 of the VAT Directive].
- Example 18: The place of supply of services supplied by a company in Salzburg to a business client in Vienna will be Vienna. As the supplier is established in Austria, he will charge Austrian VAT to his client.
- Example 19: For accountancy services supplied by a Bulgarian company to a business customer with his place of business in Austria, Austrian VAT must be charged. If the Bulgarian supplier is not established in Austria, the Austrian customer will account for VAT under the reverse charge mechanism.
- Example 20: Finnish VAT must be charged (by the customer using the reverse charge procedure) where legal services are supplied by a Polish company to a customer whose place of business is in Sweden but provided to the customer's fixed establishment in Finland.
- Example 21: Advertising services supplied by an Italian company to a public authority in Spain which, because of its intra-Community acquisitions of goods, is identified for VAT purposes, are taxed in Spain using the reverse charge mechanism.
B2C services [Article 45 of the VAT Directive].
- Example 22: For consultancy services provided by a supplier established in Lisbon to a private customer who resides in Denmark, Portuguese VAT must be charged.
- Example 23: A supplier established in Greece will need to charge Greek VAT to a business customer established in Romania who acquires legal services to be used for his private purposes.

However, in order to ensure that VAT receipts accrue to the Member State of consumption, several exceptions have been introduced:

B2C services provided by an intermediary are taxed at the location where the main transaction, in which the intermediary intervenes, is taxable [Article 46 of the VAT Directive]
- Example 24: The private owner of a summer cottage in France who wants to move some furniture to his home in Sweden may ask an intermediary to find a company that will take care of the removal. No matter where the intermediary is established, French VAT will be due on the commission fee because the place of taxation of the intra-Community transport of goods is the place of departure.
B2B and B2C servicesconnected with immovable property are taxed where the immovable property is located [Article 47 of the VAT Directive].
- Example 25: An architect based in France hired to design a summer house in Spain will charge Spanish VAT to his customer.
- Example 26: A guest staying in a hotel in Nicosia will have to pay Cypriot VAT on the hotel accommodation.

→ Explanatory Notes on EU VAT rules regarding the place of supply of services connected with immovable property that enter into force in 2017. These notes are not legally binding.

B2B and B2C passenger transport is taxed according to the distances covered [Article 48 of the VAT Directive].
- Example 30: The price of a bus ticket for a trip from Poland to France through Germany will include Polish, German and French VAT, proportionate to the distances travelled in each of these countries. Should the trip pass via Switzerland, there will be no EU VAT on the distances covered in that country since Switzerland is not a member of the EU.
B2C transport of goods, other than intra-Community transport, is taxed according to the distances covered [Article 49 of the VAT Directive]
- Example 31: For goods transported for a private customer from Paris to Marseille, the company carrying out the transport must charge French VAT irrespective of where it is established.
B2C intra-Community transport of goods (goods departing from one Member State and arriving in another) is taxed at the place of departure [Article 50 of the VAT Directive]
- Example 32: For goods transported from Germany to France for a private customer, German VAT must be charged on the transport irrespective of where the company carrying out the transport, or the customer is established.
B2C ancillary services to the transport of goods, such as the loading and unloading services, are taxed in the Member State where those services are physically carried out [Article 54 of the VAT Directive]
- Example 33: A Danish company unloads a truck in Rotterdam for a private individual, the supplier will need to charge Dutch VAT.
B2B services in respect of admission to cultural, artistic, sporting, scientific, educational, entertainment and similar events will be taxed at the place where those events actually take place [Article 53 of the VAT Directive]
- Example 34: When an Irish company for business purposes pays for the entry to an opera in Verona, the ticket will contain Italian VAT. That applies whether the ticket is bought on-line or at the ticket booth.
- Example 35: For a conference organised in Stockholm for participants paying a fee to attend, Swedish VAT is charged.
- Example 36: The work of drawing up a scientific report by the University of Cologne for a pharmaceutical company in Denmark will be subject to Danish VAT and accounted for by the Danish company (because it is not a service in relation to the admission to an event). This service will instead be taxed under the general rule of Article 44.
B2C services relating to cultural, artistic, sporting, scientific, educational, entertainment and similar activities will be taxed at the place where those activities actually take place [Article 54 of the VAT Directive]
- Example 37: A ticket bought by a tourist going to Spain for a football match played in Madrid will contain Spanish VAT.
- Example 38: A student living in Antwerp who follows a management course in a business school in the Hague will be charged Dutch VAT.
B2B and B2C restaurant and catering services, other than those supplied on board ships, aircraft or trains during the section of a passenger transport effected within the EU, are taxed at the place where the services are physically carried out [Article 55 of the VAT Directive]
- Example 39: Guests dining at a restaurant in Paris will be charged French VAT.
- Example 40: A company which caters for an event in Firenze, arranging for food and drinks which it prepares and serves to the guests must charge Italian VAT on the services, no matter where it is established.
When B2B and B2C restaurant and catering services are supplied on board ships, aircraft or trains during the section of a passenger transport effected within the EU, tax is paid at the place of departure of the transport [Article 57 of the VAT Directive].
- Example 41: A meal served in a restaurant on board a ferry sailing from Helsingor (DK) to Helsingborg (SE) (or any EU port) is subject to Danish VAT.
B2B and B2C short-term hiring of means of transport is taxed at the place where the means of transport is actually put at the disposal of the customer [Article 56 of the VAT Directive]. Short term covers the continuous possession or use of a means of transport throughout a period of not more than 30 days or, in the case of vessels, not more than 90 days.
- Example 42: A Belgian, on holiday or on business, in the Baltic countries arrives at Riga airport and picks up a car hired for two weeks, Latvian VAT will be charged on the hire.
- Example 43: For a boat hired in Sardinia for 2 months, the hire will be subject to Italian VAT regardless of who is hiring the boat and where it goes.
Electronically supplied services, provided by suppliers established in a third country to non-taxable persons (B2C) established in the EU, must be taxed at the place where the customer resides or has a permanent address [Article 58 of the VAT Directive]
- Example 44: If a private person residing in Sweden makes use of a Japanese on-line library, Swedish VAT will have to be paid on the amount the Japanese company charges.
Radio and television broadcasting services and telecommunications services, supplied by suppliers established in a third country to non-taxable customers (B2C) in the EU, are taxable at the place where the private customer effectively uses and enjoys the service [Article 59b of the VAT Directive]
- Example 45: A French private customer with a Swiss telecoms operator using his mobile phone in France will be charged French VAT. When using his mobile phone during his holidays in Greece, Greek VAT will be charged for the calls made from Greece.
- Example 46: When a private individual living in Barcelona pays a US company for access to American channels, he will need to pay Spanish VAT on the broadcasting services received.
B2C services like advertising services, services of consultants and lawyers, financial services, telecommunications services, broadcasting services and electronically supplied services are taxed at the place where the customer is established provided the customer is established in a non-EU country [Article 59 of the VAT Directive].
- Example 47: When a Hungarian company sells an anti-virus programme to be downloaded through its website to private individuals residing in Australia, there will be no VAT due in Hungary.
- Example 48: Services rendered by a Belgian lawyer to a US professor will not be subject to VAT in Belgium.

To prevent double taxation, non-taxation or distortion of competition, Member States may decide to shift the place of supply of services, which are either inside or outside the EU to inside or outside their territory, when according to the effective use and enjoyment of the service this differs from the place of supply as determined by the general rules, those for hire of means of transport, or certain B2C services to a customer outside the EU [Article 59a of the VAT Directive]

Example 49: Advertising services provided by a company in Norway to a US business is normally taxed where the customer is established and no EU VAT is due. However, if the media used for the advertising campaign is within a Member State, this Member State may decide that VAT is due on its territory, making use of the effective use and enjoyment rule.
Example 50: A German company supplies to a Swedish company the service of transporting goods from the US to China. Even though the transport takes place fully outside the EU, this supply is taxable in Sweden, at the place where the customer is established. Sweden may make use of the effective use and enjoyment rule in order to avoid taxing such a transport taking place outside its territory and outside EU.

Each Member State is responsible for the implementation of the effective use and enjoyment rule. The use made of the rule must be verified with the Member State concerned.

Some further exceptions will be introduced, or changes will be made to existing exceptions:

from 1 January 2013: B2C long-term hiring of means of transport will be taxed at the place where the private customer is established, has his permanent address or usually resides [Change to Article 56 of the VAT Directive] except for cases where the supplier of a pleasure boat is established in the same Member State in which he puts the boat at the disposal of the customer.
- Example 51: Austrian VAT must be paid on a rental car hired from anywhere in the EU when a private person residing in Vienna hires it for six months.
- Example 52: When a pleasure boat is hired by a German resident from Sweden for use year round, German VAT must be charged. However, if the boat is actually put at the disposal of the customer in Sweden by a supplier established there, Swedish VAT will be due.
from 1 January 2015: B2C telecommunications, broadcasting and electronically supplied services will be taxed at the place where the private customer is established, has his permanent address or usually resides [Change to Article 58 of the VAT Directive]
- Example 53: When webhosting is supplied to a private customer living in Lisbon, Portuguese VAT must be charged irrespective of whether the supplier is established in Portugal, in another EU Member State or outside the EU.
- Example 54: Greek VAT is due on the use of a mobile phone by a private customer residing in Athens.
- Example 55: Broadcasting services provided to a private customer in Helsinki will contain Finnish VAT.

Importation of goods

When goods are imported from non-EU countries or non-EU territories, the place of importation is determined by where the goods are at the point of entry into the EU.

The importation is in principle taxed in the Member State where the goods arrive [Article 60 of the VAT Directive].
- Example 56: Dutch VAT must be paid on oil from Russia when it arrives in Rotterdam where it is declared to customs.
If upon entry, goods are put under a suspensive customs procedure or similar arrangements, the importation will be in the Member State where the goods leave that procedure or arrangement [Article 61 of the VAT Directive].
- Example 57: For consumer goods which, upon entry into the EU in Poland, are placed under the transit procedure until their final destination in the Netherlands where the goods leave the customs arrangements, Dutch VAT will be due.

In simple words, if a Ukrainian company provides services to a business client in the EU, then according to general rules, the client independently calculates and pays VAT and can later receive a VAT credit.

If a Ukrainian company provides services to a client who is an end consumer in the EU, then according to the general rule, VAT is calculated and paid at the place of registration of the service provider company.

We strongly recommend If you have doubts about the need to charge VAT for your specific type of services, contact the relevant tax consultants

Document templates which may be useful for you

Agreement for Provision of Consultancy Services

Expense reimbursement agreement

Agreement for Provision of Market Research Services Agency Agreement (expenses compensation), eng, universal

Engagement Agreement for Provision of Legal and Assistance Services monthly payment/ Annex/ Invoice

Invoice / Рахунок-оферта (для юросіб, консалтингові послуги / for legal entities, consulting services), ukr-eng, EUR/USD

Invoice / Рахунок-оферта (для юросіб, ФОП, консалтингові послуги), укр-англ, євро, дол, грн

Invoice / Рахунок-оферта (для юросіб, ФОП, юридичні послуги), укр-англ, євро, дол, грн

Договір про надання послуг (будь-яких, послуг, укр-англ ) + акт, рахунок, допугода

Договор за услуга

Договір про шипчандлерські послуги (укр-англ )