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About EU VAT |
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What is the Special Scheme for Electronic Services? |
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It is an optional scheme for the VAT treatment of electronic services supplied by non-EU business to private consumers in the EU, where such businesses have no physical presence in the EU, that came into force on 1 July 2003. The purpose of the special scheme is to reduce the compliance burden and administrative costs for taxable persons.
Broad outline of the special scheme The special scheme enables the non-EU supplier to choose one EU country in which to register and pay VAT, regardless of the Member State in which the private consumer resides. Once registered the supplier must make returns, declaring the VAT due on all the on-line sales to consumers within the EU. A special return form will be provided under which the supplier must provide a breakdown of all electronic supplies to customers in each Member State. Payment is to be made to a designated account in the Member State of registration. That Member State must re-distribute these VAT receipts to Member States in accordance with the amounts due as declared by the supplier. The rate of VAT will be the standard rate in the country where the consumer resides. For example, an Australian business supplies on-line digital products to private individuals in Ireland, France and Germany. It opts to register for the special scheme in Ireland. It charges Irish VAT to its Irish customers, French VAT to its French customers and German VAT to its German customers. It registers electronically in Ireland, puts all the details on a single quarterly electronic return and pays all the VAT due to the Irish Revenue each quarter. The Irish Revenue will retain the Irish VAT and distribute the French and German VAT to those countries within an agreed time period. |
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What are electronically supplied services? |
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An "electronically supplied service" is one that is delivered over the Internet (or an electronic network which is reliant on the Internet or similar network for its provision) and is heavily dependent on information technology for its supply - i.e. the service is essentially automated, involving minimal human intervention and in the absence of information technology does not have viability. An indicative list of such services is given in Annex L of the 6th VAT Directive.
On the basis of the above definition, the EU VAT Committee, which discusses VAT technical issues, has indicated that an electronically supplied service includes:
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What VAT rate applies? |
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| Electronically supplied services are taxable at the standard rate in each Member State, unless an exemption applies in a Member State. For example, if the "traditional" supply of gambling is exempt in a country, it would also be exempt in that country if it constituted an electronically supplied service. | |
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What businesses are eligible to use the special scheme? |
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A business is eligible to use the special scheme if that business:
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How do I register in Ireland for this Special Scheme? |
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| Revenue is setting up an identification register of non-EU suppliers who opt to register in this country under the scheme. Registration will only be accessible through the Revenue On-line System (ROS) and will be different from the normal VAT registration process. Non-EU suppliers must supply certain details on line to ROS in order to register under the scheme. Access the Revenue web site, www.revenue.ie and link to ROS. | |
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What information is required at registration? |
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The non-EU supplier must furnish, electronically, on the registration page on ROS, the following information to Revenue in order to register under the scheme:
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How will I receive my VAT Registration Number? |
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| When registration is confirmed, Revenue will e-mail the applicant his or her special VAT number, together with details on how the digital certificate is to be retrieved. | |
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Must a business be making supplies before registering? |
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| Not necessarily. On registration, the supplier must state the date from which the supply of electronically supplied services to EU consumers commences. For example, a supplier could register in August on the basis that the supplies would start from 1 September. Note however that nil returns must be submitted if there are no supplies in a calendar quarter. | |
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Must a business make supplies in Ireland in order to register here? |
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| No. Businesses who only make, or intend making, supplies under the special scheme to customers in other EU countries may register for the special scheme in Ireland if they so wish. The VAT due in those other Member States will be paid to the Revenue Commissioners, who will distribute it to the relevant tax authorities. | |
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What if I have made supplies in currencies other than the euro? |
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| Where transactions are carried out using currencies other than the euro, the supplier should convert the amount into euro using the conversion rate published by the European Central Bank for the last date of the relevant calendar quarter. If there is no publication on that date, the rate on the next day of publication should be used. | |
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Records |
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| Suppliers registered for the special scheme must keep records of all transactions affecting their VAT liability - for example, the value and date of the transaction, the customer's name and location, etc. These records must be kept for 10 years and must be made available electronically, on request, to the tax authorities in the Member State where the supplier is registered for the special scheme and to each Member State where the supplier's customers reside. | |
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