Sales Taxation

Sales Taxation

Place of Supply - Services

The place of supply determines whether a transaction is subject to German VAT.

The place of supply of services depends on whether they are rendered to private consumers (B2C) or to commercial businesses (B2B). If the recipient is a private consumer, the place of supply is where the entrepreneur's business or permanent establishment is based. In B2B-relationships, on the other hand, the place of supply is usually where the customer's permanent establishment is located.

Notable exceptions:

  • Services related to land or property, VAT liability exists where the land or property is located.
  • Transportation services - VAT liability is incurred where the transport is performed. Note that special rules apply in case of intra-community transportation.
  • Work (e.g. valuation, inspection, repair) carried out on moveable goods - VAT liability exists where the goods are located at the time of the work done (this rule may not apply where the goods do not remain in the same location throughout the installation work).
  • Use of patents, copyrights and trademarks, advertising, legal, financial tax, technical and management consulting services, use of information and know-how, provision of personnel, leasing of goods (but not vehicles). In these cases, the place of supply is where the customer is established: VAT is levied where the non-EU customer or the taxable person/entity in a member state other than that of the supplier is established.
  • Services related to cultural, artistic, sporting, scientific, educational, entertainment, and other similar activities. VAT is charged at the place where the activities actually take place.
  • Radio and television broadcasting services and telecommunication services supplied by a non-EU entrepreneur and are used and enjoyed within the EU. In this case the place of supply is the place where the services are effectively used and enjoyed.

On January 1, 2015 a new EU VAT place of supply of services rule was implemented for selling digital services (telecommunications, broadcasting, and e-services). When selling to private customers within the EU, businesses must now charge VAT in the EU country where the customer is located. This means that the place of taxation for the supply of telecommunications, broadcasting, and electronic services are now the same for both B2B and B2C sales.

Since VAT is a very complex subject and there are many different cases and exceptions, it is recommended that all trading companies seek competent advice in this area, to make sure that they are fully informed about the taxes that apply to their products. A suitable tax advisor might be found through the search engine of the German Association of Tax Advisors.

Furthermore The German Federal Central Tax Office maintains a comprehensive online tax information center on taxes in Germany and the taxation procedure. More information on the European harmonization process of the European taxation systems can be found on the relevant pages of the European Commission.

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