Virtual Activities: EU VAT’s Effort to Recompose the Broken ‘Unity of Action, Time and Place’ – Part I

On 7 December 2021, government ministers from European Union (EU) countries gathering at the EU Council agreed on updates of the current rules governing value added tax (VAT) rates for goods and services. The new EU rules on VAT rates represent a long-awaited modernisation of the relevant provisions contained in Annex III to Directive 2006/112/CE (the VAT Directive), which date back to the 1990s, much earlier than 2016-17, when the EU Commission finally endorsed a destination-based VAT.

Discussions among Member States’ representatives for new rules on VAT rates have taken a long time. The EU Commission had tabled an initial proposal to modernise the current laws on VAT rates more than three years ago, on 18 January 2018. It is now for the EU Parliament to have a say on the compromise text agreed upon by participants at the EU Council’s meeting of 7 December 2021.

While the bulk of the new rules relate to VAT rate modernisation, the EU Council’s draft text interestingly contains a few changes to the place of supply rules for services (VAT Directive, Title V, Chapter 3, Articles 43-59a). In particular, the new VAT legislation includes a set of provisions that aim to clarify the place of supply of services relating to ‘activities which are streamed or otherwise made virtually available’ (according to the wording used in Point 10b of the compromise text).

Source Kluwertaxblog