• Explanatory notes

VAT explanatory notes place of supply changes

The VAT explanatory notes were drafted to provide a better understanding of the B2C place of supply legislation adopted by the EU in October 2013.

Feb 7, 2014

The VAT explanatory notes (final discussion took place on Monday, February 17) were drafted to provide a better understanding of the legislation adopted by the EU in October 2013. The notes themselves do not replace VAT committee guidelines which has its own role in the process. They are a guidance tool for businesses to clarify the practical application for of the new rules for BTE (broadcasting, telecommunications and electronic services).

The explanatory notes are guidelines and a work in progress, the EU Commission is not legally bound by them, and member states may well produce their own guidelines in time. The VAT explanatory notes were drafted after a series of meetings (Fiscalis Workshop, EU VAT expert group) between member states and businesses.

The draft explanatory notes meeting on B2C VAT changes regarding place of supply for broadcasting, telecommunications and electronic services took place in Brussels on Monday, February 17.


The crucial change in the place of supply rules for BTE’s with B2C sales in the EU is that from January 1, 2015, the VAT to be charged is based on the location of the end consumer. For example a person downloading/streaming music in Germany will pay German VAT. The exisiting rule is that VAT is charged based on where the company providing the service is based. For example for a UK company providing an online music download service to German customers, then UK VAT is charged. The rule change only affects B2C sales. More here.

The EU’s reasoning is to close a loophole in the VAT system. VAT is a consumption tax so the place of consumption should be where the VAT is due, this is what the rule change copperfastens. The new rules eradicate the competitive advantage of businesses that chose a low-tax member state (i.e. Luxembourg) in which to set up HQ. It is a levelling of the playing field.

Mini One Stop Shop:

One of the measure introduced through the rule change is the Mini One Stop Shop (or MOSS). The rule change will mean that businesses must know where all their B2C sales take place in the EU: you need to know where your end consumer is located. If you have sales in all 28 EU member states then that is a lot of administrative work.

However, a BTE business has the option of registering with MOSS in one EU member state. Quarterly returns are made to MOSS and that member state then distributes the relevant VAT to the other countries where VAT is due. More on MOSS here.

BTE definitions:

The explanatory notes attempt to define broadcasting, telecommunication and electronic services (BTE). Current EU legislation gives authoritative guidelines on telecommunications and electronic services but it is silent on broadcasting. New provisions have now been included to clearly define what is meant when referring to BTE. Read our blog here and here for more.

Legislation includes the phrase “shall include …” in reference to BTE, this is future-proofing as it allows for technological advances to be governed.

There is also legal language used in the phrase “includes, in particular, the following … “, it is not definitive, thus ensuring legal certainty.

The definition of ‘broadcasting’ in the legislation is narrow and only includes audio and audio-visual services such as radio or TV programmes transmitted to the general public via the internet on the basis of a programme schedule under the editorial control of the media service provider.

Audio or audio-visual programmes provided on demand (such as Netflix) cannot be seen as broadcasting services but are seen as electronic services. Broadcasting must be simultaneous and to the general public. On demand, however, is to an individual at any time: not part of a simultaneous broadcast to the general public.

Taxamo content is created for guidance only, please consult your local tax advisor.