As mentioned in the previous article, the general rules for determining the place of taxation for VAT purposes in international supply of services depend largely on the status of the client. Thus, in case these are considered as taxable persons, (in general terms) VAT will be charged where the client is established. If the client is not a taxable person, VAT will be applied in the Member State of the supplier (see in this regard the article in which we explain some useful concepts, such as permanent establishment, place of business or permanent address).
Considering the above, we will see what the Regulation implementing EU VAT Directive says about the status of customers.
According to the EU Regulation (article 18), unless information on the contrary, the supplier of the services may consider the client as a taxable person for VAT purposes:
(i) when the customer has communicated his individual VAT identification number to him, and the supplier obtains confirmation of the validity of that id. number and of the associated name and address; or
(ii) when the customer has not yet received an individual VAT id. number, but informs the supplier that he has applied for it and the supplier obtains any other proof which demonstrates that the customer is a taxable person and carries out a reasonable level of verification of the accuracy of the information provided by the customer (“by normal commercial security measures such as those relating to identify or payment checks”).
The latter is a typical case: when the client is applying for the registration in the VIES database and has not yet been included. In such cases, we would recommend to provide the registration return or similar documents (for instance, Spanish form 036).
In case the provider does not obtain the customer’s VAT id. number, it is authorised by the Regulation to consider him as no taxable person and, consequently, charge the corresponding VAT charge of the Member State where he is established (the supplier). It should be noticed that, according to the Regulation, the client is obliged to provide to the supplier of the service, with his VAT Id. number.
As regards the non-EU customers, paragraph 3 of article 18 of the Regulation, unless the supplier has information to the contrary, the client should be considered as a taxable person in case he provides the supplier with a relevant certificate issued by the correponding Tax Authorities stating that he is entitled to obtain the VAT refund as he is carrying out economic activities, or in case he provides any equivalent tax id. number that can be verified by the supplier by “normal commercial security measures”.
Finally, it should be added that non taxable legal persons obliged to be identified for VAT purposes in order to perform intra-EU acquisitions will be considered as a taxable persons. In these cases, if said persons have their VAT id. numbers in order to receive intra-EU services, will not be obliged to provide their VAT id. number in their intra-EU acquisitions of goods (unless they opt for taxing said goods at destination).