THE EUROPEAN COUNCIL REGULATION ON VAT

ECOVIS Miškinis, Kvainauskas ir partneriai advokatų kontora

The European Council Regulation No. 282/2011 (hereinafter – the Regulation) of March 15, 2011 has entered into force on July 1, 2011 and lays down the implementing measures for Directive 2006/112/EC (hereinafter – the Directive) on the common system of value added tax (hereinafter – VAT). The Regulation sets the rules for determining the place of taxation for VAT purposes in international supply of services.

In order to determine the place of taxation for services, the place where the supplier and the customer are established shall be determined and the status of the customer shall be defined. The correct application of the rules governing the place of supply of services relies mainly on the status of the customer as a taxable or non-taxable person, and on the capacity in which he is acting. Communication by the customer of his VAT identification number to the supplier is sufficient to establish that the customer is acting in his capacity as a taxable person. The same applies if the customer provides proof that he has requested a VAT number in his country.

For non-EU customers, the supplier should collect a tax certificate, VAT or similar number evidencing that the customer is a taxable person. If the customer is established in more than one country, the service will be taxed at the place of the fixed establishment receiving that service and using it for its own needs.
As the Regulation is binding and directly applicable in the member states, the rules set down in the Regulation are likely to reduce the differences in interpreting the provisions of the Directive.