Options for extending VAT rules for platforms in the EU

Only seemingly complicated

What is the framework for ensuring that cross-border services are properly provided in the EU, both financially and tax-wise?

What tax rules apply to a distribution system - a platform - providing intra-Community services?

In this context, the regulation of agency and intermediary services was also examined, as this is the only context in which the whole regulation can be understood: there is currently no dedicated set of rules for platforms in force. Let's look at what we need to know to guide you as a business and as a client.

One possible way of providing services is the provision of agency services, whereby the agent acts in the name and on behalf of the principal, and no legal relationship is created between the agent and the customer. In this case, the customer is usually liable to pay VAT, in special cases the customer. If the service is not a cross-border service, i.e. an agency service supplied within the country, the standard rate of VAT on the service is 27% of the taxable amount. The customer issues a receipt for the service to the non-taxable customer, the customer charges and declares and pays the VAT to the tax authorities. The agent issues an invoice for the exempt supply to the Community taxable person, who charges and deducts the tax under the reverse charge rules.

The place of supply of the agent's services is the place of establishment of the taxable person's customer. If the principal has no establishment in the country, no VAT is charged on the consideration for the agency service.

In the case of an intermediary service, the intermediary buys the service in his own name and resells it in the same form, so that the trader is both buyer and seller of the service. In this case, the purchase and sale are treated as two separate transactions, where the sale and purchase prices, place of supply and VAT rate may differ, but the time of supply and the content of the service and invoice are the same. In such cases, the invoice must show separately the services supplied by the intermediary and the own-account services and must be endorsed with the mandatory remark 'The invoice includes an intermediary service'.

It is worth reflecting on the extent to which the conditions for data subjects would change if it were possible to introduce platform rules for intra-Community sales and services.  For example, in cases where the platform facilitates the intra-Community supply of services, the platform taxation rules would apply.

So, to look in a little more detail, where a non-taxable person supplies goods to a non-taxable person in the Community, the taxable persons facilitating the transaction are currently subject to the VAT legislation for platforms. The legislation was designed to create a tax liability for platforms under the fiction that two supplies are made at the same time, one between the foreign supplier and the platform and one between the platform and the end user.

It is worth rethinking the value chain along this logic in the light of the above where the platform facilitating the intra-Community supply of services does not order the service on its own behalf and resell it as an intermediated service, but the platform orders the service from the service provider on behalf of the customer for the customer. Thus, there is in fact one supply, but using the fiction described earlier, it is assumed that two supplies take place, the first supply (B2B) being an intra-Community tax-exempt supply subject to the reverse charge rules, the second supply (B2C) being taxable. In this case, the taxable person is the platform operator who declares and pays the VAT. This is similar to the taxation of an intermediated service, except that the platform does not order the service on its own behalf but on behalf of the customer. The tax is based on the value of the service provided by the actual supplier plus the value of the services provided by the platform, which the customer pays to the platform as part of the gross price. Accordingly, the administration of the platform's transactions would be simplified and it would be possible to simply declare and pay the tax to the relevant countries through the one-stop shop system.

In our view, this would significantly simplify the current regulatory framework, which to many seems complicated, and would make the free movement of services and goods within the Community more efficient, thereby increasing the EU's competitiveness, even at Member State level.

The NM Innovation Workshop is conducting research on this topic in cooperation with the Institute of Accounting and Finance of the University of Debrecen, and we will report on the results of this research!

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