Determining the place of supply for VAT purposes on international services
31/05/23
A common misconception post-Brexit is that there have been significant changes to the way that VAT is applied to international services. But to put it briefly, subject to certain exceptions, not much has changed regarding the cross-border supply of services. If your business offers international services, it’s important that you fully understand how to comply with VAT regulations, from where the place of supply is classed as, to reverse charge obligations.
We thought it may be useful to share a reminder of the rules surrounding the place of supply for international supply of services.
Place of supply
The place of supply of a service is where that service is treated as being supplied. This is the place where it’s liable to VAT. If the place of supply is in the UK it is subject to UK VAT but if it is overseas it is said to be outside the scope of UK VAT.
The general rule is that for services supplied to a:
- business customer, the place of supply is the place where the customer belongs;
- non-business customer, the place of supply is the place where the supplier belongs.
Therefore, it is key to understand where a business “belongs”. In general, a business belongs where:
- the business establishment is located (e.g. head office);
- the fixed establishment (e.g. branch) most linked to the supply is located, if it is a different country than the business establishment.
How to charge VAT if the place of supply is outside the UK
If the place of supply is outside the UK, you do not charge UK VAT.
For some supplies, you may need to register and account for VAT overseas, whereas in most instances there is a reverse charge obligation on the customer.
Where the recipient of the services has a reverse charge obligation, the supplier is allowed to designate them as the party liable for VAT payment. VAT isn’t charged by the supplier but is accounted for by the customer on their own VAT return.
If you have any questions about places of supply for VAT purposes, then please contact Anette Holzinger our Inward Investment Partner at anette.holzinger@mgr.co.uk
You can find more of the latest accountancy news here!
