What are the most important rules and aspects regarding services (inbound and outbound)?
Globally, most of the rules currently in force are generally intended to tax supplies of goods, services and intangibles within the jurisdiction where consumption takes place.
For this reason VAT/GST systems usually contain “place of taxation” rules that address all transactions, on the basis of which it can be determined where a service is considered to take place and thus which country is entitled to tax it. Such place of taxation rules build on “proxies” that indicate where the goods or services are expected to be eventually consumed. Alternatively, taxation in the place of (likely) consumption may be achieved by making outbound services free of VAT/GST or exempt (with a credit).
On the other hand, the jurisdiction of (likely) consumption will tax the services coming in, so that local VAT/GST applies to the inbound services. Often, the taxation of inbound services is coupled to a switch in the liability to pay the tax from the supplier to the customer (the so-called "reverse charge mechanism"). Within the EU, for electronically supplied services to consumers, a special regime is in place to enable foreign taxable persons to report the VAT on those services via the tax authorities in one Member State (the "mini One-Stop Shop regime", often abbreviated to "MOSS").
For various reasons, the rules on taxation of inbound and outbound services do not always achieve the result of taxation in the jurisdiction of consumption. Quite often, services are taxed in the country where the supplier is established. Moreover, they differ per VAT/GST jurisdiction. Therefore, the VAT/GST treatment of inbound and outbound services must always be considered on a case-by-case basis.
- , OECD International VAT/GST Guidelines ' <http://www.oecd.org/ctp/consumption/international-vat-gst-guidelines.htm> (December 2015)
- , Guide to the mini One Stop Shop ' <ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/telecom/one-stop-shop-guidelines_en.pdf> (December 2015)