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ETNO
European Telecommunications Network Operators' Association

2011

| ETNO

RD363 - ETNO Reflection Document - on new Business to Consumers 2015 place-of-supply VAT rules for telecommunications services

The new B2C 2015 place of supply rules for telecommunications services will have a big impact on telcos’ businesses, will result in huge costs and may create an unworkable situation and/or irresolvable problems in relation to a non-domestic customer base and the small amount of revenue from individuals resident in another Member State (much less than 1 %).


Summary

The new B2C 2015 place of supply rules for telecommunications services will have a big impact on telcos’ businesses, will result in huge costs and may create an unworkable situation and/or irresolvable problems in relation to a non-domestic customer base and the small amount of revenue from individuals resident in another Member State (much less than 1 %). 

Furthermore, applying the default rules would also prevent rate shopping as the cards will be subject to VAT in the country of the SIM’s country code and from an economicperspective customers would only buy a subscription with a SIM card in a country where the SIM card primarily would be used.

For the same reasons, the proposed default rules would also do away with any distortion of competition as a result of the non-uniform VAT treatment of vouchers within the EU (the prepaid SIM cards would be subject to VAT in the country of the SIM’s country code and from an economical perspective customers would only buy a SIM card with a country code of the country where the card primarily would be used).
Enclosures:
• Business cases referring to the new Business to Consumers 2015 place-of-supply VAT rules for telecommunications services

Enclosure 1

Business cases referring to the new Business to Consumers 2015 place-of-supply VAT rules for telecommunications services

1. A German resident possesses a second home in The Netherlands which he uses for a period of three weeks a year. For the remaining weeks of the year, the property is rented out. The German resident secures a subscription for a fixed telecoms line service. The German resident provides to the Dutch telco the address of his second home. How should the Dutch telco identify the customer’s residence?  In this scenario, the location of the fixed line (The Netherlands), regardless of the place of residence declared by the customer, clearly represents the place where the actual consumption takes place.

2. A Swedish tourist stays at a hotel in The Netherlands and purchases a voucher for Internet access (i.e. Hot Spot) at the reception of the hotel. Based on the new rules, the Dutch telco should charge Swedish VAT. How should the Dutch telco identify the customer’s residence?

3. A telco is asking a customer for proof of his place of residence. The customer refuses. How should the telco identify the customer’s residence?

4. Dual residences exist and create a lot of questions and create opportunities for misuse. For instance, a non-taxable person works and stays in Sweden during the week but actually lives in Denmark. The Swedish resident subscribes for telecommunication services from a Danish telco using the service they consume in Denmark. What is the place of residence of the customer?

5. A customer makes a call from a phone kiosk in Germany – what VAT should be charged?  It is neither practical nor logical to require the supplier to identify whether the place of taxation should be Germany or somewhere else in the same way as it is not practical to identify whether the customer is using the service for business or non-business purposes or whether the customer is an EU or a non EU resident.   The answer should be the following: the suggested default rule is that the customer is taxable as a local in the country of service (Germany).

6. Prepaid cards for mobile subscriptions: there are practical issues in identifying the customer because payment is sometimes made remotely by text, at an ATM or through a third party such as a retail outlet. Two basic issues arise – how to identify the customer or even the country of supply. For prepaid as a whole, it is not likely that the identity of the customer and place of taxation can be verified with any certainty. VAT treatment based on the SIM country code will solve this matter.

7. Norway (third country) and Sweden (EU member): A person living in the EU travels across the border to work in Norway. In Norway the customer subscribes for telecommunication services from a Norwegian telco. The Norwegian supplier treats the supply as being local (which it is). The Norwegian mobile telco does not register in Sweden and does not charge Swedish VAT despite the fact that the customer happens to live in a country within the EU. VAT treatment based on the SIM country code will solve this matter.


Members & Observers - View companies map

  • Albtelecom
  • Proximus
  • Eir
  • Elisa Communications Corporation
  • GO Plc (Malta)
  • Hrvatski Telekom
  • Koninklijke KPN
  • Lattelecom
  • Magyar Telekom
  • Makedonski Telekom
  • Orange
  • OTE
  • Portugal Telecom
  • Síminn (Iceland Telecom Ltd.)
  • Slovak Telekom
  • Swisscom
  • TDC
  • TDF
  • Telecom Italia
  • Telefónica
  • Telekom Austria
  • Telekom Slovenije
  • Orange Polska
  • Telenor
  • Telia Company
  • Turk Telekom
  • Vivacom
  • Deutsche Telekom AG
  • CYTA (Cyprus Telecommunications Authority)
  • BT
  • BH Telecom
  • TELEKOM ROMANIA COMMUNICATIONS S.A.
  • POST Group

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