VAT on services
Services are provided every day, nationally as well as internationally. Examples are the services provided by Baker Tilly as your advisor, or the streaming services you use to listen to a podcast. Services are also subject to VAT. To determine the VAT implications of services, the nature of the service is primarily decisive. Additionally, the type of customer and the place of establishment or residence of the customer influence the VAT implications of the service.
Differentiation between general services and exceptions
For your business to comply with VAT laws and regulations, it is essential to determine the correct VAT implications for your services. Generally speaking, the VAT rules make a distinction in so called general services and specific exceptions. You need to assess for each service where the service is subject to VAT.
There are for example exceptions for:
- Services concerning immovable property - e.g. the services of estate agents and architects
- Services concerning passenger transport - e.g. transportation of passengers by coach
- Services concerning events - e.g. providing access to a conference
Another important exception is applicable to digital services to consumers. Such services are subject to VAT in the country of residence of the consumer. Examples of digital services include streaming services and providing online access to (or downloading of) apps and software. If, for example, you provide such services to a consumer resident in France, you would be liable for French VAT. This French VAT must be paid by means of French VAT returns or through a simplified system called the MOSS (Mini One Stop Shop). This simplified system does however have limitations. You need to have arranged everything properly beforehand in order to use the system. Proper preparation is very important and often proves to be a cost-saving measure for your business in the long run.
Did you know that it is not only EU countries that levy VAT on such services to consumers? Increasingly, tax authorities of non-EU countries levy indirect taxes on such services. Would you like to know where your services are subject to VAT? We would be happy to help you find out and guide you through the processes.