Amended proposal for a Council Directive amending Directive 77/388/EEC as regards the place of supply of services (presented by the Commission pursuant to Article 250 (2) of the EC Treaty)
Date: 2005-07-20
Institutions: European Commission
Subjects: VAT, head office, provision of services, services company, tax system

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 20.7.2005 
COM(2005) 334 final 

2003/0329 (CNS) 

Amended proposal for a 

COUNCIL DIRECTIVE 

amending Directive 77/388/EEC as regards the place of supply of services 

(presented by the Commission pursuant to Article 250 (2) of the EC Treaty) 

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EXPLANATORY MEMORANDUM 

1)  CONTEXT OF THE PROPOSAL 

110 

•  Grounds for and objectives of the proposal 

When the European Commission first adopted its new VAT strategy, modernising the 
rules on the place of supply of services was identified as one of the future priorities. 

This  prompted  a  general  and  thorough  review  of  the  rules  governing  the  place  of 
supply of services as a whole. Consistent with the guidelines for future work identified 
by  the  Commission,  this  review  was  guided  by  the  principle  that  VAT  should  be 
imposed at the place of consumption. 

One of the main purposes of this review is further to simplify the VAT rules applicable 
to traders in accordance with the objectives set in the Lisbon Strategy. 

120 

•  General context 

To  ensure  that  the  rules  on  the  place  of  supply  of  services  -  and  hence  the  place  of 
taxation - met the objective that tax should accrue to the country of consumption, the 
Commission proposed to amend the rules governing the place of supply of services to 
taxable persons, by generally making such services taxable in the Member State where 
the  customer  is  established  and  simultaneously  extending  the  scope  of  the  reverse 
charge  mechanism.  Once  implemented,  these  changes  should  ensure  taxation  at  the 
place of consumption. 

As  largely  similar  considerations  apply,  it  would  be  illogical  to  leave  the  rules  on 
services to non-taxable persons unchanged. Under the current rules, in the absence of 
specific  provisions  they  are  taxed  where  the  supplier  of  the  service  is  established.  If 
such services can be supplied at a distance and the customer bears the full VAT burden, 
there is, however, a clear risk of distortion of competition. In addition, differences in 
VAT rates have a more substantive impact in the case of supplies of services to non-
taxable  customers,  where  they  can  influence  companies'  decisions  to  relocate  their 
activities. 

To avoid further complicating trade, the proposed amendments to the rules determining 
the  place  of  supply  for  services  provided  to  non-taxable  persons  should  to  a  large 
extent be in line with the rules proposed for taxing similar services to taxable persons. 
Moreover, any change should avoid increasing traders' administrative costs. 

In order to simplify the obligations for traders  who  supply  goods  and  services  across 
borders,  the  Commission  has  already  proposed  a  “one-stop”  mechanism  allowing 
traders to fulfil all their VAT obligations for EU-wide activities in the Member State in 
which they are established. This mechanism would allow traders to use a single VAT 
number  for  supplies  provided  throughout  the EU  and  to  make  VAT  declarations  to  a 
single electronic portal from which they would then be transmitted automatically to the 
different Member States where the traders have supplied goods or services. This one-
stop  mechanism  will  make  it  easier  for  suppliers to fulfil their obligations when they 
become  liable  to  pay  VAT  in  a  Member  State  where  they  are  not  established  or 

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otherwise identified for VAT purposes. 

With  the  one-stop  mechanism,  the  Member  State  which  has  identified  the  taxable 
person for VAT purposes will be given a complete overview of all the activities of the 
taxable  person  throughout  the  EU.  This  should  maintain  the  general  quality  of  the 
controls  and  ensure  that  VAT  has,  in  every  case,  been  paid  in  the  EU.  At  a  more 
detailed  level,  in-depth  controls  will  be  necessary  to  check  that  the  VAT  has  been 
correctly paid in the right Member State and, where necessary, to secure adjustment. 

Taxing  services  supplied  to  non-taxable  persons  at  the  place  of  consumption  ensures 
that  the  influence  of  VAT  rates  on  the  place  of  supply  will  always  be  neutral. 
Regardless  where  the  taxable  person  carrying  out  the  transaction  is  established,  be  it 
inside  or  outside  the  EU,  the  service  will  be  taxed  and  this  will  be  done  at  the  rate 
which applies in the Member State of consumption. As further harmonisation of VAT 
rates is unachievable for the time being, this would leave Member States free, under the 
current  VAT  regime,  to  set  their  rates  of  VAT  without  major  risks  of  distortion  of 
competition in these transactions. 

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•  Existing provisions in the area of the proposal 

Supplies between taxable persons were addressed in an earlier proposal submitted by 
the Commission (COM(2003) 822). Although the changes proposed applied to supplies 
to  taxable  persons  only,  this  proposal  nevertheless  included  a  new  set  of  rules  to 
replace the existing rules on the place of supply of services. To bring about the second 
and final part of the reform of the rules on place of supply, covering services supplied 
by taxable persons to non-taxable customers, this proposal - which is yet to be adopted 
by the Council - would need to be amended. 

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•  Consistency with other policies and objectives of the Union 

Not applicable. 

2)  CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

211 

Consultation methods, main sectors targeted and general profile of respondents 

Over  the  last  few  months,  consultations  were  held  with  Member  States  in  a 
Commission  working  group  in  order  further  to  discuss  problems  with  the  place  of 
supply rules for services and how best to resolve them. Additionally, during February 
and  March  of  this  year,  a  public  consultation  was  undertaken  on  this  matter.  Over 
70 written  responses  were  received  from  industrial  associations  and  businesses  from 
various  sectors  and  countries.  The  main  sectors  responding  to  the  consultation  were 
telecommunications and e-commerce, transport, consultants and law firms, restaurants 
and travel agents, car leasing companies, industry and some financial institutions. 

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Summary of responses and how they have been taken into account 

Most  replies  related  to  the  part  of  the  proposal  amending  the  rules  on  the  place  of 
supply of services provided at a distance, which would see these services taxed in the 

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Member  State  of  the  customer.  According  to  the  respondents,  this  would  entail 
additional  administrative  burdens  for  the  sectors  concerned  and  lead  to  a  series  of 
practical  problems  which  would  need  to  be  solved.  While  these  comments  are  valid, 
the  Commission  still  believes  that  the  new  rules  are  necessary  in  order  to  ensure 
taxation at the place of consumption and to eliminate distortion of competition caused 
by relocation of business to Member States applying low VAT rates.  

Very many comments were also received on the idea of changing the place of supply 
for  passenger  transport  services.  Although  some  businesses  supported  this  idea,  there 
was  also  strong  opposition,  mainly  from  airlines  fearing  that  the  new  rules  could 
encourage  Member  State  to  abolish  the  current  exemption.  Most  replies  showed  that 
the  place  of  taxation  was  not  viewed  as  a  major  problem.  Instead,  the  real  issues  are 
exemptions applied by Member States and the inequity in VAT treatment of transport 
by  air  and  road.  Strong  emphasis  was  also  put  on  the  practical  problems  that  any 
taxation of these services would entail. Against this background, it was decided not to 
change this rule. 

Travel agents and tour operators also expressed serious concern about the suggestion to 
amend the rules governing the place of supply of services provided by an intermediary 
since reverting to the general rule, as proposed, could encourage traders to relocate to 
other  Member  States  or  even  to  non-EU  countries.  They  argued  that,  although 
sometimes  difficult  to  apply,  the  current  rules  best  ensure  taxation  at  the  place  of 
consumption. This proposal takes account of these comments and maintains the current 
rules for this type of service. 

Car rental and leasing companies were strongly in favour of having similar rules for the 
services they render whether the customer is a taxable person or a non-taxable person. 
They  also  accepted  the  difference  in  treatment  between  long-term  leasing  and  short-
term renting. Various criteria for taxing these services were put forward, e.g. place of 
effective  use  or  enjoyment,  place  where  car  is  registered,  etc.  This  proposal  for  a 
directive takes these comments into account by providing that the place of supply for 
short-term hiring should be identical for B2B and B2C services, whereas all long-term 
leasing  of  means  of  transport,  both  to  taxable  and  non-taxable  persons,  should  be 
taxable  at  the  place  where  the  customer  is  established.  This  responds  to  the  concerns 
expressed  by  the  sector  that,  otherwise,  companies  might  relocate  to  Member  States 
which apply low VAT rates. 

The  restaurant  and  catering  sector  mainly  supported  the  ideas  put  forward  by  the 
Commission  to  tax  restaurant  services  where  they  are  physically  provided  or,  if 
provided on board means of transport, at the place of departure. The place of supply of 
these services will therefore be amended accordingly. 

213 

An open consultation was conducted over the internet from 3 February to 4 April 2005. 
The  Commission 
available  on 
http://europa.eu.int/comm/taxation_customs/common/consultations/tax/index_en.htm. 

received  71 responses.  The 

results 

are 

•  Collection and use of expertise 

229 

There was no need for external expertise. 

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230 

•  Impact assessment 

In  the  field  of  indirect  taxation,  common  rules  concerning  the  place  of  supply  of 
services  are  necessary  to  avoid  cases  of  double  taxation  or  non-taxation  for  the 
economic operators concerned. The best way to achieve this result while guaranteeing 
Member States maximum flexibility is a Commission initiative.  

When  preparing  new  Community  legislation  in  the  field  of  VAT  which  has  a  direct 
impact  on  business,  as  is  the  case  with  this  proposal,  the  Commission  considers  it 
necessary to consult not only the tax administrations but also other interested parties. In 
order to prepare this new proposal, the Commission first discussed the broad principles 
with Member States in a Commission group in January 2005. This was followed by a 
public  consultation  over  the  internet.  Extensive  informal  contacts  were  also  fostered 
with the business community, by actively participating in meetings and forums on this 
issue and organising bilateral talks with the sectors concerned. 

The  results  of  this  consultation  process  were  taken  into  account  to  the  largest  extent 
possible  and  then  resubmitted  to  the  Member  States.  The  result  is  this  proposal  for  a 
Council  Directive,  which  is  a  delicate  balance  between  the  needs  for  control  and 
correct  allocation  of  VAT  resources  for  tax  administrations  and  for  simple,  uniform 
and straightforward rules for traders.  

3)  LEGAL ELEMENTS OF THE PROPOSAL 

305 

•  Summary of the proposed action 

The purpose of this proposal is to amend certain provisions of the Sixth VAT Directive 
governing the place of supply of services to non-taxable customers. These changes are 
proposed  in  order  to  ensure  taxation  of  services  at  the  place  of  consumption  and  to 
avoid relocation of companies. 

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•  Legal basis 

Article 93 of the EC Treaty. 

•  Subsidiarity principle 

The  subsidiarity  principle  applies  insofar  as  the  proposal  does  not  fall  under  the 
exclusive competence of the Community. 

The  objectives  of  the  proposal  cannot  be  sufficiently  achieved  by  the  Member  States 
for the following reasons: 

The  supply  of  services  can  involve  more  than  one  Member  State.  Common  rules 
governing the place of supply of services for VAT purposes are therefore essential. 

It is clear that if Member States were to apply individual rules governing the place of 
supply  of  services  in  the  field  of  VAT,  this  could  lead  to  double  taxation  or  non-
taxation.  This  would  significantly  damage  Member  States'  interests,  as  well  as  EU 
businesses. 

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324 

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Community action will better achieve the objectives of the proposal for the following 
reasons: 

If the neutrality of the VAT system is to be ensured, the risk of double taxation or non-
taxation  must  be eliminated.  The best way to achieve that objective  is  a Commission 
proposal laying down the rules for determining the place of supply of services. 

This way, in principle no cases of double taxation or non-taxation should arise. 

An initiative at Community level, creating a single place of supply of a specific service, 
is the appropriate tool to deal with this issue. 

The proposal therefore complies with the subsidiarity principle. 

•  Proportionality principle 

The proposal complies with the proportionality principle for the following reasons: 

It  is  a  proposal  for  a  directive,  which  the  Member  States  have  to  implement  in  their 
national  legislation.  This  instrument  is  commonly  used  for  Commission  initiatives  in 
the field of indirect taxation and leaves some room for manoeuvre to Member States. 

The basic objective of this proposal is to ensure that supplies of services are taxed, to 
the  largest  extent  possible,  at  the  place  of  actual  consumption.  Furthermore,  this 
proposal will not lead to any additional administrative burdens for tax administrations 
nor will it impose disproportionate administrative burdens on businesses, thus meeting 
the objectives set in the Lisbon Strategy. 

•  Choice of instruments 

Proposed instrument: directive. 

Other means would not be adequate for the following reason: 

This  proposal  is  an  amendment  to  a  previous  Commission  proposal  for  a  Council 
Directive  and  therefore  takes  the  form  of  a  directive.  This  amended  proposal  is 
presented  pursuant  to  Article 250(2)  of  the  EC  Treaty  and  takes  into  account  the 
principles of subsidiarity and proportionality.  

4)  BUDGETARY IMPLICATIONS 

409 

The proposal has no implications for the Community budget. 

5)  ADDITIONAL INFORMATION 

507 

550 

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•  Simulation, pilot phase and transition period 

There was or will be a transition period for the proposal. 

•  Correlation table 

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The  Member  States  are  required  to  communicate  to  the  Commission  the  text  of 
national  provisions  transposing  the  Directive  as  well  as  a  correlation  table  between 
those provisions and this Directive. 

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•  Detailed explanation of the proposal 

BASIC PARAMETERS 

It is an established principle that VAT is a consumption tax. Any changes to the rules 
governing  the  place  of  supply  of  services  should  therefore,  to  the  greatest  extent 
possible,  follow  the  principle  that  taxation  should  be  at  the  place  where  the  actual 
consumption  occurs.  However,  this  should  not  lead  to  additional  obligations  which 
could be regarded as disproportionate, burdensome or impractical. 

Unlike VAT on services to taxable persons, the VAT charged on services provided to 
non-taxable  persons  (final  consumers)  cannot  be  deducted  by  the  customer.  As  non-
deductible  VAT  forms  part  of  the  VAT  revenues  of  Member  States  it  is  even  more 
important  to  ensure  that  the  principle  of  taxation  at  the  place  of  consumption  is 
observed whenever possible. 

PROBLEMS  ENCOUNTERED  AND  PROPOSED  CHANGES  TO  COMMISSION 
PROPOSAL COM(2003) 822 

According to the general rule, the place of supply of services is deemed to be the place 
where the supplier has established his business or has a fixed establishment from which 
the service is supplied or, in the absence of such a place, the place where the supplier 
has  his  permanent  address  or  usually  resides.  Beyond  this,  a  number  of  exceptions 
override this general rule and can change the place of taxation depending on the nature 
of the service supplied. 

As  regards  services  supplied  to  non-taxable  persons,  exceptions  exist  for  services 
relating  to  immovable  property,  transport  -  both  passenger  and  goods  -,  cultural, 
artistic,  sporting,  scientific  and  educational  activities,  work  on  tangible  movable 
property and, in particular cases, for intangible services, including copyrights, patents, 
advertising, professional services (e.g. engineers, lawyers, etc.), the supply of staff, the 
hiring  out  of  tangible  movable  property,  telecommunications,  radio  and  television 
broadcasting and electronically supplied services. 

The  structure  of  these  rules  creates  a  number  of  problems  which,  in  cases  where 
services are  supplied to  non-taxable persons, are exacerbated when  such supplies can 
be provided at a distance without any safeguard having been put into place.  

1. 

General rule 

Currently, the general rule is taxation at the place where the supplier is established. In 
most  cases,  this  rule  leads  to  taxation  at  the  place  of  actual  consumption.  This  is 
certainly  the  case  where  services  are  supplied  locally.  It  is  also  a  rule  which  is  very 
easy to apply for the service provider, as all he needs to know is the VAT legislation 
and rates of his own Member State.  

While taxation at the place of consumption would best be achieved by taxing services 

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at the place where they are actually used or enjoyed, experience shows that, in many 
cases, it is very difficult to determine where the service is used or enjoyed. Although, 
from  a  strict  theoretical  VAT  point  of  view,  this  is  possibly  the  most  correct  rule  to 
apply in order to comply fully with the character of VAT as a consumption tax, it is not 
considered  appropriate  to  use  as  a  general  rule,  mainly  because  of  the  practical 
problems  linked  to  determination  of  this  place  in  cases  where  the  service  is  used  or 
enjoyed in different jurisdictions. This would also create an unnecessary administrative 
burden for the business. 

The  alternative  would  be  to  tax  all  supplies  of  services  to  non-taxable  persons  at  the 
place  where  the  customer  is  established.  This  solution  would,  however,  also  impose 
disproportionate  administrative  burdens  on  traders,  as  they  would  always  have  to 
determine  the  place  of  establishment  of  their  client  and,  in  the  absence  of  a  one-stop 
mechanism,  would  have  to  register  in  every  Member  State  where  they  have  non-
taxable customers and to collect and remit tax to those Member States.  It would also 
place additional administrative burdens on the tax administrations, whilst at the same 
time  offering  no  particular  advantage  in  terms  of  quality  of  control.  This  is  certainly 
not  in  line  with  the  conclusions  reached  at  the  Lisbon  summit.  Therefore,  in  the 
absence  of  a  mechanism  enabling  tax  to  be  collected  in  the  Member  States  of 
consumption  without  creating  undue  administrative  complications,  it  is  unrealistic  to 
tax all supplies to final customers at the place of consumption. 

These burdens can be avoided if the current rule is maintained as the general rule. In 
most cases, it achieves the objective of taxation at the place of consumption and is very 
easy to apply by the supplier, who can simply apply his own national VAT rules and 
does not need to check the identity of the customer. This is substantiated by very many 
of  the  responses  received  to  the  public  consultation.  Taking  this  into  account,  the 
proposal is to maintain the place of establishment of the supplier as the general rule. 

2. 

Specific rules 

Although  in  most  cases  the  main  rule  does  lead  to  taxation  at  the  place  of  actual 
consumption,  there  are,  nevertheless,  a  number  of  areas  where  specific  rules  are 
needed.  These  are  areas  where  continuation  with  the  existing  rules  would  cause 
practical  difficulties  for  businesses  if  the  proposed  treatment  of  B2B  services  were 
adopted without a corresponding change for B2C; or where the existing rules could be 
held to be inadequate or impractical; or where the current rules fail to comply with the 
principle  of  taxation  at  the  place  of  consumption  in  an  area  of  major  financial 
importance.  In  some  other  areas  consideration  of  the  burden,  simplicity  and 
observation  of  the  principle  of  taxation  at  the  place  of  consumption  has  tilted  the 
balance towards maintaining the current specific rules. The following cases have been 
identified, where it is considered necessary to allow  certain exceptions to the  general 
rule for both administrative and policy reasons: 

2.1. 

Immovable property (current Article 9(2)(a)) 

A first exception would need to be to maintain the current rule in respect of services 
relating  to  immovable  property.  This  rule  is  reasonably  straightforward  to  apply  and 
generally results in taxation where the service is consumed. In addition, this sector is 
often subject to exemptions, which in turn affect rights of deduction.  

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As  the  Commission  has  already  proposed,  in  the  B2B  proposal,  to  maintain  this 
exception,  covering  supplies  to  both  taxable  and  non-taxable  persons,  no  further 
changes are necessary. 

2.2. 

Passenger transport (current Article 9(2)(b)) 

Passenger transport services are currently, as an exception, taxed in proportion to the 
distances  covered.  To  apply  this  rule  on  an  internal  market  without  fiscal  frontiers  is 
impractical  and  difficult.  It  implies  that  a  coach  company  which  transports  tourists 
from  Paris  to  Amsterdam  needs  to  apply  French,  Belgian  and  Dutch  VAT  to  each 
relevant  part  of  the  journey  and  to  pay  the  corresponding  amount  of  VAT  to  the  tax 
authority of each of these Member States. In practice this rule is quite burdensome and 
very difficult to apply for the operators involved. 

As  it  was  very  difficult  to  address  the  issue  for  taxable  persons  only,  without  taking 
into account services of this type to non-taxable persons, this problem was not tackled 
in  the  initial  B2B  proposal.  Instead,  it  was  left  for  a  future  proposal  on  B2C  to  deal 
with this question. 

Consideration has been given to the possibility of taxing passenger transport services, 
irrespective  of  the  means  used,  at  the  place  of  departure.  This  would  be  in  line  with 
previous  undertakings  and  coincides  with  what  was  previously  proposed,  but  should 
not bring changes to  the  level of rates and exemptions currently applied to passenger 
transport  services  in  the  different  Member  States.  Even  so,  as  illustrated  by  previous 
discussions,  this  rule  would  not  necessarily  resolve  the  matter.  Instead,  it  would 
probably create other problems as it would provide scope for tax avoidance through the 
relocation of transport services. 

From the responses to the consultation, it appears that a mere change to the rules on the 
place  of  supply  will  not  be  able  to  solve  the  problems  encountered  in  this  sector. 
Therefore,  despite  the  difficulties  with  the  current  rules,  many  would  still  prefer  to 
retain them until the Commission puts forward a proposal not only tackling the place of 
supply  of  passenger  transport  services  but  also  eliminating  the  current  distortions  of 
competition  between  the  different  means  of  transport  in  terms  of  VAT  rates  and 
exemptions  currently  applied  by  Member  States  in  this  sector.  The  companies  that 
currently have to charge VAT on their passenger transport services were not convinced 
that taxation at the place of departure would reduce the problems.  

The existing rule, consisting of taxing passenger transport services on the basis of the 
distances covered, ensures that the tax accrues to the Member State of consumption. To 
replace  that  rule  by  taxation  at  the  place  of  departure  –  the  only  viable  alternative 
identified in studies undertaken for the Commission – would not see transport services 
taxed at the place of consumption to the same extent. Moreover, the burden of having 
to split up the price according to the distances covered in each Member State would be 
diminished with the one-stop mechanism. 

Under  these  circumstances,  the  Commission  proposes  to  leave  the  existing  rule 
unchanged. To better reflect the current text, the initially proposed wording is slightly 
modified. 

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2.3. 

Intra-Community transport of goods (current Article 28b(C)(2)) 

The current rule is that the place of supply, in the case of intra-Community transport of 
goods  services  provided  to  persons  not  identified  for  VAT  purposes,  is  the  place  of 
departure.  This  implies  that  a  transport  company  carrying  out  a  cross-border  removal 
for a non-taxable person needs to charge VAT in the Member State where the transport 
starts. Such companies are therefore liable for VAT in all Member States from which 
they carry out removals. 

Although this is recognised as quite burdensome for the traders involved, it would not 
be  appropriate  to  return  either  to  the  general  rule  or  to  the  distances  covered.  The 
concern is that taxation of such services at the place where the supplier is established 
could  lead  to  relocation  of  the  supplier  either  to  a  Member  State  with  a  more 
preferential  VAT  rate  or  even  to  a  non-EU  country.  This  concern  was  shared  by  a 
number  of  respondents  to  the  public  consultation.  Against  that  background,  the 
preference is for maintaining this exception, to which operators are now used. 

The principal inconvenience of this rule is that it forces removal companies to fulfil all 
the  VAT  obligations  in  every  Member  State  from  where  they  start  a  removal.  This 
problem could, however, largely be solved by applying the one-stop mechanism, which 
would allow these companies to centralise these obligations at one place.  

2.4.  Restaurant and catering services (current Article 9(1)) 

Restaurant services cover a cluster of features and activities, of which the provision of 
food is only one component and in which services largely predominate. Such services - 
which  are  tangible  in  nature  and  supplied  for  immediate  consumption  at  a  readily 
identifiable location - should, as an exception, be taxed where the service is physically 
carried out. While this is often the same as the place where the supplier is established, 
which is currently the determining factor when taxing such services, this is not always 
so, especially in the case of catering services. Where that is not the case, the rule that 
the place of supply is the place where the service is physically carried out better reflects 
the  reality  of  where  such  services  are,  for all  intents  and  purposes,  consumed.  It  also 
ensures a level playing field between suppliers of such services. 

In order to achieve this result, a new point (d) is added to Article 9f(1). 

However, this rule should not apply to the supply of restaurant or catering services on 
board ships, aircraft or trains during a passenger transport service as it would be very 
difficult to determine where the service is physically carried out. Instead, such services 
should, in line with on-board supplies of goods, be taxed at the place of departure of 
the passenger transport service. 

It is therefore proposed to add a new second paragraph to Article 9d(1) stipulating that 
the  place  of  supply  of  restaurant  or  catering  services  to  taxable  customers  on  board 
ships,  aircraft  or  trains  during  a  passenger  transport  service  will  be  the  place  of 
departure of that transport service. A similar provision will be inserted as a new second 
paragraph in Article 9f covering the supply of such services to non-taxable customers. 

2.5.  Hiring of means of transport (current Article 9(1)) 

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Hiring of means of transport is deemed to have been supplied not at the place of use of 
the  means  of  transport  but,  with  a  view  to  simplification  and  in  conformity  with  the 
general rule, at the place where the supplier has established his business. Since means 
of  transport  can  easily  cross  frontiers,  this  rule  does  not  properly  ensure  that  VAT 
accrues to the Member State of consumption. To address this issue, it is necessary to 
regulate it separately. 

As the place of use of means of transport is difficult, if not impossible, to determine, it 
is necessary to put into place a practical rule for charging VAT. In the B2B proposal, 
this  problem  was  tackled  by  moving  the  place  of  taxation,  in  the  case  of  long-term 
leasing of means of transport, to the place where the customer is established under the 
general  rule.  For  short-term  hiring  only,  the  place  of  supply  under  the  B2B  proposal 
would be the place where the supplier is established insofar as the means of transport is 
used in the same Member State. In practice this implies taxation at the place where the 
taxable  customer  takes  possession  of  the  means  of  transport,  unless  the  supplier  is 
established in another Member State. 

It  would  not  be  desirable  to  have  a  different  set  of  rules  for  the  hiring  of  means  of 
transport, depending whether the customer is a taxable person or not. It is clear from 
the responses to the public consultation that this would be a major cause for concern to 
the sectors involved. To be consistent, it would be logical to align the rules on B2C on 
the treatment proposed for B2B. 

For  short-term  hiring,  this  would  avoid  the  need  for  the  rental  company  to  verify 
whether the customer is a private individual or a taxable person. The company would 
simply charge the VAT in the Member State where the person takes possession of the 
means of transport in order to use it there for a short period. For long-term leasing the 
concerns  raised  by  the  sector  for  B2B  services  apply  equally  to  B2C  services.  The 
current rule consisting of taxation at the place of establishment of the supplier leads to 
relocation of car rental companies to Member States which apply low VAT rates to car 
leasing or which, in the case of business customers, allow more favourable deduction 
rules. Therefore, it is necessary to put into place rules ensuring that the VAT is paid in 
the Member State of consumption. For practical reasons this is deemed to be where the 
customer is established. If the customer is a non-taxable person, the tax would need to 
be accounted for by the supplier. For the suppliers, the practical inconvenience is that 
this forces them to fulfil VAT obligations in every Member State where they have non-
taxable  customers.  This  problem  could,  however,  largely  be  solved  by  applying  the 
one-stop  mechanism,  which  would  allow  these  companies  to  centralise  these 
obligations in one place. 

It is therefore proposed to add a new paragraph 3 to Article 9f stipulating that the place 
of supply  in the case of long-term  leasing to non-taxable customers will be the place 
where  the  customer  is  established,  has  his  permanent  address  or  usually  resides.  For 
short-term hiring the place of supply would be the place where the means of transport 
is  actually  placed  at  the  disposal  of  the  non-taxable  person.  This  paragraph  also 
includes a definition of long-term leasing. 

Exhibitions,  fairs,  cultural  events,  valuation  of  and  work  on  tangible  movable 

2.6. 
property (current Article 9(2)(c)) 

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For  cultural,  artistic,  sporting,  entertainment  or  similar  services,  the  current  rule 
provides  for  taxation  at  the  place  where  such  services  are  physically  provided.  This 
applies  equally  to  services  relating  to  valuation  and  work  on  tangible  movable 
property.  It  is  widely  accepted  that,  overall,  this  rule  results  in  taxation  where 
consumption  occurs.  Amendment  of  the  current  rule  could  cause  additional  problems 
(e.g.  relocation  of  traders)  and  would  certainly  move  away  from  the  principle  of 
taxation  at  the  place  of  consumption.  As  for  the  administrative  burdens  for  the 
suppliers involved, these could be minimised with the proposed one-stop mechanism. 

While the current rule should be left unchanged, it must be ensured that only services 
requiring  some  human  presence  are  covered  by  this  rule.  Otherwise,  suppliers  of 
services  which  can  be  supplied  without  any  human  presence,  notably  training  or 
teaching  provided  at  a  distance,  could  relocate  to  Member  States  which  apply  more 
favourable VAT rates to such services, especially when they are supplied to customers 
with no right to deduct the input VAT. These services should, therefore, be taxed at the 
place  where  the  customer is  located, in the same way as other services which can be 
supplied remotely.  

To  achieve  this  result,  point (c)  of  Article 9f(1)  is  to  be  amended  to  exclude  from  it 
teaching supplied without the physical presence of the service provider. 

2.7. 

Services which can be supplied at a distance (current Article 9(1)) 

Electronically  supplied  services,  telecommunication  services  and  radio  and  television 
broadcasting  services  as  well  as  distance  teaching  can  be  and  are  supplied  to  non-
taxable persons  at a  distance.  Financial services are also increasingly supplied in this 
way. When supplied to taxable persons, these services are taxed in the Member State of 
the customer, a rule retained in the new B2B proposal. When supplied to non-taxable 
persons, these services are taxed at the place where the supplier is established. 

Given the ease with which these services can be supplied, there is a very real risk that 
the supplier's decision on where to locate his business could be influenced by VAT rate 
issues,  all  the  more  so  when  supplying  to  customers  bearing  the  full  VAT  burden. 
There is empirical evidence that, with the adoption of new rules for electronic services, 
suppliers of electronic services established outside the EU have been setting up a fixed 
establishment  in  Member  States  with  the  most  attractive  VAT  rates  from  where  they 
supply  all  their  customers  throughout  the  EU.  Equally,  EU  companies  are  changing 
their place of establishment in order to benefit from this competitive advantage. 

The  general  principle  of  taxation  at  the  place  of  consumption  is  then  no  longer 
observed,  nor  is  the  principle  of  trade  on  a  level  playing  field.  This  is  a  cause  of 
concern  to  several  Member  States,  as  highlighted  on  several  occasions  and  most 
recently during the Council discussions on the B2B proposal. 

For  these  types  of  services  provided  to  non-taxable  persons,  the  place  of  taxation 
should be changed from the place where the supplier is established to the place where 
the  customer  who  receives  the  service  is  located.  At  this  stage  this  exception  should 
not,  however,  cover  financial  services,  most  of  which  are  currently  exempt.  Instead, 
treatment of these services should be dealt with in the global proposal on the taxation 
of financial services.  

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With this rule, the supplier would have to charge VAT in the Member States where his 
customers are established or domiciled, using the VAT rate applicable in each specific 
Member  State.  This  is  probably  the  reason  why  most  reactions  received  during  the 
public  consultation  from  companies  involved  in  this  type  of  activities  are  very 
negative. It will indeed lead to additional administrative burdens for these traders, but 
much  of  the  inconvenience  that  this  might  cause  could  be  addressed  by  those  traders 
opting  for  the  one-stop  mechanism,  leaving  only  one  place  where  all  the  obligations 
must  be  fulfilled  and  providing  an  electronic  means  to  do  so.  Therefore,  the 
Commission  strongly  believes  that this proposal can only achieve the full scale of its 
simplification  when  accompanied  by 
this 
simplification  the  amended  rules  would  impose  disproportionate  administrative 
burdens on business and run strongly counter to the Lisbon Strategy. 

the  one-stop  mechanism.  Without 

This rule would apply to all suppliers, irrespective whether they are established inside 
or outside the EU. In this way, suppliers established in a non-EU country would receive 
the  same  treatment  as  suppliers  established  in  the  EU  and  they  would  also  have  to 
comply  with  the  same  rules,  including  the  obligation  to  pay  the  VAT  due  to  each 
Member State where they are liable for VAT. Currently a temporary special rule makes 
the  provision  of  electronically  supplied  services  by  suppliers  established  outside  the 
EU  to  non-taxable  customers  in  the  EU  taxable  at  the  place  where  the  customer  is 
established. This rule together with the special scheme laid down in Article 26c of the 
Directive  was  observed  well  by  providers  of  electronically  supplied  services 
established  outside  the  EU.  While  in  the  first  instance  tax  collection  is  primarily  a 
matter  for  the  Member  States,  in  the  context  of  examining  the  operation  of  Directive 
2002/38/EC, Member States have provided the Commission with information showing 
that  on  30  June  2004  there  were  617  live  registrations  for  non-established  taxable 
persons  availing  themselves  of  the  simplified  scheme.  In  the  year  to  30  June  2004, 
these non-established taxable persons paid VAT totalling €90 315 000. 

The  Commission  also  held  a  seminar  in  June  2004  in  the  context  of  the  Fiscalis 
Programme at which practical implementation of the Directive was discussed. Member 
States  expressed  satisfaction  with  its  utility  and  application.  Therefore,  the  rules 
proposed  would  make  the  temporary  rule  in  Article 9(2)(f)  permanent.  The  part  that 
relates to Article 26c of the Directive is currently being dealt with under the proposed 
general one-stop mechanism. 

To achieve this result, the proposal is first of all to delete Article 9g which will become 
redundant  with  the  introduction  of  the  new  Article 9g.  Secondly  it  is  proposed  to 
replace  the  first  paragraph  of  Article 9g  by  a  text  covering  services  which  can  be 
supplied  at  a  distance  to  non-taxable  persons.  This  new  paragraph 1  would  make 
supply of the following services taxable at the place where the non-taxable customer is 
established: electronically supplied services, telecommunication services, broadcasting 
services  and  teaching  services  provided  without  the  physical  presence  of  the  service 
provider.  The  Commission  considers  it  preferable  to  concentrate  on  those  services, 
where  there  is  clearly  a  real  risk  of  distortion  of  competition  or  relocation  of  trade, 
rather than introducing a general description of all services which can be supplied at a 
distance. 

Finally,  in  order  to  allow  traders  to  continue  to  use  the  current  rules  determining  the 
place  of  taxation  of  services  supplied  electronically  to  non-taxable  customers,  the 

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Commission proposes that these rules enter into force on 1 July 2006 at the latest. 

2.8. 

Services provided by intermediaries (current Article 28c(E)(3)) 

When  intermediaries  supply  services  to  final  consumers  who  are  not  identified  for 
VAT purposes, these services are taxed at the place where the principal transaction to 
which  they  relate  (supply  of  goods  or  services  or  intra-Community  acquisition)  is 
taxed.  As  this  rule  is  not  always  easy  to  apply,  thought  was  given  to  taxing  services 
provided by intermediaries at the place where the intermediary is established. Any such 
change,  however,  gives  rise  to  some  concern  as  services  supplied  by  intermediaries 
established outside the Community would escape taxation despite being linked to EU 
activities.  The  ensuing  distortion  of  competition  could  be  further  compounded  by  the 
relocation of suppliers, even within the EU, to Member States which apply lower VAT 
rates. This risk is especially high for this type of services as they need little equipment, 
office  space  etc.  These  concerns  are  certainly  shared  by  a  large  proportion  of  the 
sectors which responded to the public consultation, especially by the transport sector, 
tour operators and travel agents. 

Based  on  these  arguments  and  on  the  fact  that  the  disadvantages  of  additional 
compliance  and  tax-induced  distortion  clearly  outweigh  the  benefits  of  any  change 
from a system which, although not ideal, traders have managed to make work over the 
years, the Commission proposes to maintain the current place of supply of services by 
intermediaries  to  non-taxable  customers.  Nevertheless,  rather  than  maintaining  these 
rules  in  their  current  form,  they  should,  for  clarity,  be  brought  together  in  a  single 
provision. To this end, Article 9i, which now becomes Article 9h, is to be amended in 
order clearly to define that the place of supply of such services will be the place where 
the principal transaction is carried out. The exceptions provided for in the original text 
of Article 9i are deleted so that all services provided by intermediaries to non-taxable 
customers are now covered. 

Suppliers  and 
2.9. 
Article 9(2)(e) and (f)) 

recipients  established 

in  a  non-EU  country 

(current 

When  services  falling  under  the  current  Article 9(2)(e)  are  supplied  to  customers  not 
established within the Community, the place of supply is currently situated outside the 
Community. This situation should be maintained.  

When  e-commerce,  telecommunication  and  broadcasting  services  are  provided  by  a 
supplier established outside the EU, under current rules the supplier may become liable 
for  payment  of  VAT  in  the  Member  State  where  the  non-taxable  customer  is 
established  or  in  the  Member  State  where  the  service  is  effectively  used  or  enjoyed. 
These provisions were included in order to ensure fair competition between suppliers, 
whether  established  inside  or  outside  the  EU,  when  supplying  such  services  to  non-
taxable  customers  in  the  EU.  Those  rules  will  be  maintained  and  incorporated  in  the 
revised Article 9h, which becomes Article 9g. 

Taking into account that these provisions are now covered by Articles 9g and 9h, the 
proposal  is  to  amend  Article 9j,  which  will  now  become  Article 9i,  by  deleting  the 
reference to points (h), (j), (k) and (l). 

2.10.  Anti-avoidance provision (current Article 9(3)) 

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Current rules enable Member States to override any of the rules applying to the place 
of  supply  if  there  is  a  need  to  avoid  double  taxation  or  non-taxation  or  to  address 
distortion  of  competition.  The  scope  of  this  rule  is  limited  as  it  only  covers  supplies 
governed by Article 9(2)(e). However, the B2B proposal already envisaged extending 
this  rule  to  all  the  provisions  on  place  of  supply,  including  both  taxable  and  non-
taxable persons. No further changes are, therefore, necessary.  

2.11.  Exchange of information using the VAT Information Exchange System (VIES) 

In  its  original  proposal,  the  Commission  proposed  introducing  the  obligation  for 
taxable persons to include services in their recapitulative statements, thereby allowing 
the information to be exchanged between Member States using the VIES exchange of 
information  with  effect  from  1 January  2008.  This  was  because  at  the  time  of  the 
proposal,  the  Commission  was  about  to  undertake  a  feasibility  study  to  improve  the 
VIES. This study has now been completed, and has shown that it is technically feasible 
to  include  the  exchange  of  information  on  services  within  the  current  VIES. 
Accordingly, the date of commencement of the reporting obligation for taxable persons 
will be the same as the date of entry into force of the proposed modifications, namely 
1 July 2006 and the specific date of 1 January 2008 is deleted 

2.12.  Technical changes to the proposal 

Finally, a number of technical changes are necessary in order to clarify the wording of 
the provisions as well as the cross-references to Articles amended by this proposal.  

In  Article 1(2),  the  paragraphs  of  Article 9d  are  numbered  and  a  new  paragraph 2  is 
inserted.  Furthermore,  a  cross-reference  to  paragraph 1  is  added  to  the  definition  of 
long-term leasing now featuring in paragraph 3. 

In Article 9e(1), the words “and the services of intermediaries” are deleted as these are 
now covered by the new Article 9h. 

Article 9g  is  deleted  and  the  former  Articles 9(h),  9(i),  9(j)  and  9(k)  are  renumbered 
accordingly. 

In Article 9g, as the first paragraph is replaced by a new paragraph 1, the reference in 
paragraph 2  is  adapted  accordingly  and  now  reads  “For  the  purposes  of  point (b)  of 
paragraph 1”. 

In  Article 1(3)  of  the  initial  proposal  which  modifies  Article 12(3)(a),  the  cross 
reference to Article 9j(k) is now replaced by a reference to the new Article 9g(1)(a). 

In point (b) of Article 1(4), Article 21, in the version set out in Article 28g, to which a 
new paragraph 5 is added, is modified so as to clearly indicate the number of this new 
paragraph. 

Similarly,  a  reference  to  point (b)  is  added  to  the  text  of  the  first  subparagraph  of 
Article 22(6)(b),  in  the  version  set  out  in  Article 28h,  modified  by  Article 1(5)  of  the 
B2B proposal. 

The sixth subparagraph which was initially added to Article 22(6)(b), in the version set 

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out in Article 28g, by point (c) of Article 1(5) is taken out. 

E-10036 

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2003/0329 (CNS) 

Amended proposal for a 

COUNCIL DIRECTIVE 

amending Directive 77/388/EEC as regards the place of supply of services 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular 
Article 93 thereof, 

Having regard to the proposal from the Commission1, 

Having regard to the opinion of the European Parliament2, 

Having regard to the opinion of the European Economic and Social Committee3, 

Whereas: 

(1) 

(2) 

The  realisation  of  the  internal  market,  globalisation,  deregulation  and  technology 
change  have  all  combined  to  create  enormous  changes  in  the  volume  and  pattern  of 
trade in services. It is increasingly possible for a number of services to be supplied at a 
distance. In response, piecemeal steps have been taken to address this over the years 
and many defined services are in fact at present taxed on the basis of the destination 
principle. 

The  proper  functioning  of  the  internal  market  requires  the  amendment  of  Council 
Directive  77/388/EEC  of  17 May  1977  on  the  harmonization  of  the  laws  of  the 
Member  States  relating  to  turnover  taxes  –  Common  system  of  value  added  tax: 
uniform basis of assessment4 as regards the place of supply of services, following the 
Commission's  strategy  of  modernisation  and  simplification  of  the  operation  of  the 
common VAT system5. 

(3) 

For  all  supplies  of  services  the  place  of  taxation  should,  in  principle,  be  the  place 
where the actual consumption takes place. If the general rule for the place of supply of 
services  rules  were  to  be  altered  in  this  way,  it  would  still  be  necessary  to  utilise 

1 
2 
3 
4 

5 

OJ C , , p. . 
OJ C , , p. . 
OJ C , , p. . 
OJ L 145, 13.6.1977, p. 1. Directive as last amended by Directive 2003/92/EC (OJ L 260, 11.10.2003, 
p. 8). 
COM(2000) 348 final. 

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certain exceptions to this general rule would still be necessary for both administrative 
and policy reasons. 

(4) 

For supplies of services to taxable persons, the general rule with respect to the place of 
supply  of  services  should  be  based  on  the  place  where  the  customer  is  established, 
rather than where the supplier is established. 

(5)  Where services are supplied to non-taxable persons, the general rule should continue 
to be that the place of supply of services is the place where the supplier has established 
his business. 

(6) 

In  certain  circumstances,  the  general  rules  as  regards  the place  of  supply  of  services 
for  both  taxable  and  non-taxable  persons  are not  applicable  and  specified  exclusions 
apply.  These  exclusions  should  be  largely  based  on  existing  criteria  and  reflect  the 
principle of taxation at the place of consumption, while not imposing disproportionate 
administrative burdens upon certain traders. 

(7)  Where  a  taxable  person  receives  services  from  a  person  not  established  in  the  same 
Member  State  the  reverse  charge  mechanism  should  be  obligatory,  meaning  that  the 
taxable  person  should  self-assess  the  appropriate  amount  of  VAT  on  the  acquired 
service. 

(8) 

Services  rendered  between  different  establishments  of  a  taxable  person  are  normally 
outside the scope of Directive 77/388/EEC. In the interests of greater legal certainty, 
that position should be confirmed in legislation. 

(9) 

Directive 77/388/EEC should therefore be amended accordingly, 

HAS ADOPTED THIS DIRECTIVE: 

Article 1 

Directive 77/388/EEC is amended as follows: 

(1) In Article 6 the following paragraph 6 is inserted: 

“6.  Where  a  single  legal  entity  has  more  than  one  fixed  establishment,  services 

rendered between the establishments shall not be treated as supplies.” 

(2) Article 9 is replaced by the following: 

“Article 9 

General rule 

1. 

The  place  of  supply  of  services  to  taxable  persons  shall  be  the  place  where  the 
customer  has  established  his  business  or  has  a  fixed  establishment  to  which  the 
service is supplied. 

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18 

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2. 

3. 

If  the  place  where  a  taxable  person  has  established  his  business  or  where  he  has  a 
fixed establishment cannot be determined, the place of supply of services shall be the 
place where that taxable person has his permanent address or usually resides. 

The place of supply of services to non-taxable persons shall be the place where the 
supplier  has  established  his  business  or  has  a  fixed  establishment  from  which  the 
service is supplied. 

For the purposes of paragraphs 1 and 2, where a person is a taxable person who also 
performs  activities  or  transactions  that  are  not  considered  to  be  taxable  supplies  of 
goods or services, he shall be deemed to be a taxable person in respect of all services 
supplied to him except where the services are for his own private use or that of his 
staff. 

Article 9a 

Immovable property 

The place of supply of services related to immovable property, including the services of estate 
agents and experts, the provision of hotel or similar accommodation, the granting of rights to 
use immovable  property and services  to prepare and co-ordinate construction work, such as 
the services of architects and of firms providing on-site supervision, shall be the place where 
the immovable property is located. 

Article 9b 

Passenger transport 

The  place  of  supply  of  passenger  transport  services  shall  be  the  place  where  the  transport 
takes place, proportionate to the distances covered. 

Article 9c 

Cultural, artistic, sporting, entertainment and similar activities 

The place of supply of services relating to cultural, artistic, sporting, entertainment, or similar 
activities, including the activities of the organisers of such activities, and where appropriate, 
the supply of services ancillary to such activities, shall be the place where those services are 
physically carried out. 

Article 9d 

Specific services to taxable persons 

1. 

The place of supply of services to taxable persons, other than the long-term hiring or 
leasing  of  or  working  on  movable  tangible  property,  shall  be  the  place  where  the 
supplier  has  established  his  business  or  has  a  fixed  establishment  from  which  the 

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19 

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service is supplied, or the place where he has a permanent address or usually resides, 
when the following conditions are met: 

(a) 

(b) 

the  services  are  rendered  in  the  Member  State  in  which  the  supplier  is 
established,  has  a  fixed  establishment,  or  has  a  permanent  address  or  usually 
resides; 

the  services  require  the  physical  presence  of  the  service  provider,  or  the 
material presence of the means of providing the service, at the same time as the 
physical presence of the customer; 

(c) 

the services are provided directly to an individual for immediate consumption. 

Where  restaurant  and  catering  services  are  supplied  to  taxable  persons  on 
board ships, aircraft or trains during a passenger transport service, the place of 
supply shall be the place of departure of the transport service. 

For  the  purposes  of  paragraph 1,  ‘long-term  hiring  or  leasing’  shall  mean  an 
arrangement  governed  by  an  agreement  providing  for  continuous  possession  or  use 
of the movable tangible property throughout a period of more than thirty days. 

Article 9e 

Transport of goods for non-taxable persons 

The  place  of  supply  of  transport  services  of  goods,  including  intra-Community 
transport and the services of intermediaries, to non-taxable persons shall be the place 
of departure. 

Member States need not apply the tax to that part of the intra-Community transport 
of goods corresponding to journeys made over waters which do not form part of the 
territory of the Community. 

‘Intra-Community transport of goods’ shall mean transport of goods where the place 
of departure and the place of arrival are situated within the territories of two different 
Member States. 

The  transport  of  goods  where  the  place  of  departure  and  the  place  of  arrival  are 
situated  within  the  territory  of  the  same  Member  State  shall  be  treated  as  intra-
Community transport of goods where such transport is directly linked to the transport 
of goods where the place of departure and the place of arrival are situated within the 
territories of two different Member States. 

The ‘Place of departure’ shall mean the place where the transport of goods actually 
starts, irrespective of distances covered to the place where the goods are located and 
the ‘place of arrival’ shall mean the place where the transport of goods actually ends. 

2. 

3. 

1. 

2. 

3. 

4. 

5. 

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Article 9f 

Specific services to non-taxable persons 

1. 

The place of supply of the following services supplied to non-taxable persons shall 
be the place where these services are physically carried out: 

(a) 

ancillary  transport  activities  such  as  loading,  unloading,  handling  and  similar 
activities in the name and on behalf of other persons; 

(b)  valuations of and work on movable tangible property; 

(c) 

services  relating  to  scientific  and  educational  activities,  except  for  the 
teaching  services  referred  to  in  point (d)  of  Article 9g(1),  including  the 
activities of the organisers of such activities and, where appropriate, the supply 
of ancillary services; 

(d) 

restaurant and catering services. 

2. 

3. 

Where restaurant and catering services are supplied to non-taxable persons on 
board ships, aircraft or trains during a passenger transport service, the place of 
supply shall be the place of departure of the transport service. 

The place of supply of the long-term hiring or leasing of means of transport to 
non-taxable persons shall be the place where the customer is established, has his 
permanent address or usually resides. 

The place of supply of the hiring, other than the long-term hiring or leasing, of 
means of transport shall be the place where the means of transport is actually 
put at the disposal of the non-taxable person. 

‘Long-term hiring or leasing of means of transport’ shall mean an arrangement 
governed  by  an  agreement  providing  for  continuous  possession  or  use  of  the 
means of transport throughout a period of more than thirty days. 

Article 9g 

Electronically supplied services to non-taxable persons 

Until  30 June  2006,  the  place  of  supply  to  non-taxable  persons  of  electronically  supplied 
services, including in particular the services referred to in Annex L and services supplied by a 
taxable  person  who  has  established  his  business  outside  the  Community  or  has  a  fixed 
establishment  there  from  which  the  service  is  supplied,  shall  be  the  place  where  the  non–
taxable person is established, has his permanent address or usually resides. 

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Article 9g 

Services which can be supplied at a distance to non-taxable persons 

1. 

The place of supply of the following services to a non-taxable person shall be the 
place  where  that  person  is  established,  has  his  permanent  address  or  usually 
resides: 

(a) 

electronically supplied services, in particular those referred to in Annex L; 

(b) 

telecommunications  services,  including  the  provision  of  access  to  global 
information networks; 

(c) 

radio and television broadcasting services; 

(d) 

teaching supplied without the physical presence of the service provider. 

2. 

For  the  purposes  of  point (b)  of  paragraph 1,  ‘telecommunications  services’  shall 
mean  services relating  to  the transmission,  emission or reception of  signals, words, 
images  and  sounds  or  information  of  any  nature  by  wire,  radio,  optical  or  other 
electromagnetic systems, including the related transfer or assignment of the right to 
use capacity for such transmission, emission or reception. 

Article 9h 

Services supplied by an intermediary to non-taxable persons 

The place of supply of services rendered to non-taxable persons by an intermediary acting in 
the name and on behalf of other persons shall, where such services form part of transactions 
other  than  those  referred  to  in  Article 9e  and  Article 9j,  be  the  place  where  the  principal 
transaction is carried out according to the provisions of Articles 9a to 9g and 9i. 

Article 9i 

Services to non-taxable persons outside the Community 

The  place  of  supply  of  the  following  services  supplied  to  a  non-taxable  person  who  is 
established or who has his permanent address or usual residence outside the Community shall 
be the place where that person is established, has his permanent address or usually resides: 

(a) 

(b) 

(c) 

transfers  and  assignments  of  copyrights,  patents,  licences,  trade  marks  and  similar 
rights; 

advertising services; 

the  services  of  consultants,  engineers,  consultancy  firms,  lawyers,  accountants  and 
other similar services, as well as data processing and the provision of information; 

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(d) 

(e) 

(f) 

(g) 

(h) 

(h) 

(j) 

(k) 

(l) 

obligations  to  refrain  from  pursuing  or  exercising,  in  whole  or  in  part,  a  business 
activity or a right referred to in this Article; 

banking,  financial  and  insurance  transactions  including  reinsurance,  with  the 
exception of the hire of safes; 

the supply of staff; 

the  hiring  out  of  movable  tangible  property,  with  the  exception  of  all  means  of 
transport and of all other vehicles; 

telecommunications services, including the provision of access to global information 
networks; 

the provision of access to, and of transport or transmission through, natural gas and 
electricity distribution systems and the provision of other directly linked services. 

radio and television broadcasting services; 

electronically supplied services, in particular, those referred to in Annex L; 

the services of agents who act in the name and on behalf of other persons, when they 
procure for their principal the services referred to in this Article. 

Article 9j 

Avoidance of double taxation 

In  order  to  avoid  double  taxation,  non-taxation  or  distortion  of  competition,  Member  States 
may, with regard to the supply of the services referred to in Articles 9 to 9i, treat: 

(a) 

(b) 

the  place  of  supply  of  services,  if  situated  within  their  territory,  as  being  situated 
outside the Community, where the effective use or enjoyment of the services actually 
takes place outside the Community; 

the place of supply of services, if situated outside the Community, as being situated 
within their territory,  where  the  effective  use  or  enjoyment  of  the  services  actually 
takes place within their territory.” 

(3) In Article 12(3)(a), the fourth subparagraph is replaced by the following: 

third  subparagraph  shall  not  apply 

“The 
Article 9g(1)(a).” 

to 

the  services  referred 

to 

in 

(4) Article 21, in the version set out in Article 28g, is amended as follows: 

(a) in paragraph 1, point (b) is replaced by the following: 

“(b)  taxable persons to whom services covered by Article 9(1) are supplied if 
the services are carried out by a taxable person not established within the 
territory of the country;” 

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(b) the following paragraph 5 is added: 

“5. 

In cases where the taxable transaction is made by an establishment of a 
taxable person which is not situated in the territory of the country, where 
that  person  has  at  the  same  time  an  establishment  in  the  same  Member 
State  as  the  customer,  the  taxable  person  shall  be  deemed,  for  the 
purposes of paragraphs 1 and 2, not to be established within the territory 
of the country.” 

(5) Article 22(6)(b), in the version set out in Article 28h of Directive 77/388/EEC, is amended 
as follows: 

(a) The first subparagraph is replaced by the following: 

“(b)  Every  taxable  person  identified  for  value  added  tax  purposes  shall  also 
submit  a  recapitulative  statement  of  the  acquirers  identified  for  value 
added tax purposes to whom he has supplied goods under the conditions 
provided for in Article 28c(A)(a) and (d), and of consignees identified for 
value  added  tax  purposes  in  the  transactions  referred  to  in  the  fifth 
subparagraph  and  of  the  taxable  customers  to  whom  he  has  supplied 
services under the conditions provided for in Article 9(1).” 

(b) The third subparagraph is replaced by the following: 

“The recapitulative statement shall set out: 

– 

– 

– 

the  number  by  which  the  taxable  person  is  identified  for  purposes  of 
value  added  tax  in  the  territory  of  the  country  and  under  which  he 
effected supplies of goods in accordance with the conditions laid down in 
Article 28c(A)(a) and under which he effected supplies of services in the 
conditions laid down in Article 9(1), 

the  number  by  which  each  person  acquiring  goods  or  services  is 
identified for purposes of value added tax in another Member State and 
under which the goods or services were supplied to him, 

for  each  person  acquiring  goods  or  services,  the  total  value  of  the 
supplies  of  goods  or  services  effected  by  the  taxable  person.  Those 
amounts shall be declared for the calendar quarter during which the tax 
became chargeable.” 

(c) The following sixth subparagraph is added: 

“As regards services, the provisions of the first and third subparagraphs shall apply 
from 1 January 2008.”. 

(6) Articles 28b(C), (D), (E) and (F) are deleted. 

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Article 2 

1. 

Member  States  shall  bring  into  force  the  laws,  regulations  and  administrative 
provisions necessary to comply with this Directive by 1 July 2006 at the latest. They 
shall  forthwith  communicate  to  the  Commission  the  text  of  those  provisions  and  a 
correlation table between those provisions and this Directive. 

When  Member  States  adopt  those  provisions,  they  shall  contain  a  reference  to  this 
Directive  or  be  accompanied  by  such  a  reference  on  the  occasion  of  their  official 
publication. Member States shall determine how such reference is to be made. 

2. 

Member States shall communicate to the Commission the text of the main provisions 
of national law which they adopt in the field covered by this Directive. 

This Directive shall enter into force on the day following that of its publication in the Official 
Journal of the European Union. 

Article 3 

Article 4 

This Directive is addressed to the Member States. 

Done at Brussels,  

For the Council 
The President  

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