01 January 2015
EU VAT laws are changing for electronic service, or ‘e-service’, providers. Today, in line with existing EU VAT rules, the VAT on e-services is charged based on the location of the merchant but, from 01 January 2015, the VAT on e-services must be calculated based on the end customer’s location.
Take a minute to watch our video for a brief explanation of the 2015 EU VAT changes.
The following elements together form an eservice:
- service (i.e. not goods)
- delivered over Internet or an electronic network
- supply is essentially automated or involves only minimal human intervention
- it is impossible to ensure in the absence of information technology
There is also an additional condition, which is not explicitly stated in the legislation, but can be deducted upon the existing EU VAT case-law:
- supply is made for consideration (i.e. for payment)
Examples of e-services
The implementing regulation provides some examples of eservices.
- The supply of digitised products generally, including software and changes to or upgrades of software;
- Services providing or supporting a business or personal presence on an electronic network such as a website or a webpage;
- Services automatically generated from a computer via the Internet or an electronic network, in response to specific data input by the recipient;
- The transfer for consideration of the right to put goods or services up for sale on an Internet site operating as an online market on which potential buyers make their bids by an automated procedure and on which the parties are notified of a sale by electronic mail automatically generated from a computer;
- Internet Service Packages (ISP) of information in which the telecommunications component forms an ancillary and subordinate part (i.e. packages going beyond mere Internet access and including other elements such as content pages giving access to news, weather or travel reports; playgrounds; website hosting; access to online debates etc.);
Website supply, web-hosting, distance maintenance of programmes and equipment:
- Website hosting and webpage hosting;
- Automated, online and distance maintenance of programmes;
- Remote systems administration;
- Online data warehousing where specific data is stored and retrieved electronically;
- Online supply of on-demand disc space.
- Accessing or downloading software (including procurement/accountancy programmes and anti-virus software) plus updates;
- Software to block banner adverts showing, otherwise known as Bannerblockers;
- Download drivers, such as software that interfaces computers with peripheral equipment (such as printers);
- Online automated installation of filters on websites;
- Online automated installation of firewalls.
Supply of images, text and information and making available of databases:
- Accessing or downloading desktop themes;
- Accessing or downloading photographic or pictorial images or screensavers;
- The digitised content of books and other electronic publications;
- Subscription to online newspapers and journals;
- Weblogs and website statistics;
- Online news, traffic information and weather reports;
- Online information generated automatically by software from specific data input by the customer, such as legal and financial data, (in particular such data as continually updated stock market data, in real time);
- The provision of advertising space including banner ads on a website/web page;
- Use of search engines and Internet directories.
Supply of music, films and games, including games of chance and gambling games, and of political, cultural, artistic, sporting, scientific and entertainment broadcasts and events:
- Accessing or downloading of music on to computers and mobile phones;
- Accessing or downloading of jingles, excerpts, ringtones, or other sounds;
- Accessing or downloading of films;
- Downloading of games on to computers and mobile phones;
- Accessing automated online games which are dependent on the Internet, or other similar electronic networks, where players are geographically remote from one
Supply of distance teaching:
- Automated distance teaching dependent on the Internet or similar electronic network to function and the supply of which requires limited or no human intervention, including virtual classrooms, except where the Internet or similar electronic network is used as a tool simply for communication between the teacher and student;
- Workbooks completed by pupils online and marked automatically, without human intervention.