2010 changes in EU VAT regulations

Council Directive 2008/8 of February 12 2008 amends Directive 2006/112/EC as regards the place of supply of services; Council Directive 2008/9 of February 12 2008 provides for detailed rules regarding the refund of VAT, to taxable persons not established in the member state of refund but established in another member state; Council Directive 2008/117 of December 16 2008 amends Directive 2006/112/EC on the common system of VAT to combat tax evasion connected with intra-Community transactions.

Italy

The change to the general rule governing the place of supply of services (that is, the place where the recipient is established instead of the place where the supplier is resident), introduced by EU Directive 2008/08, will surely simplify VAT compliance requirements for the EU business entities providing services in multiple EU countries. In particular, services provided within multinational groups will benefit from the change. After the changes, domestic VAT will be charged by the supplier in State A and the group entity receiving the supply in its own country (State B) will not be affected by adverse or complicated VAT refund procedures. Furthermore, the possibility for a taxable person to claim the reimbursement of the VAT paid in a foreign country in its own state of establishment through an electronic system (instead of filing hardcopies in foreign countries), introduced by Directive 2008/9, will in general reduce costs related to the management of the reimbursement procedure (employees costs other than consultancy fees).

New EU compliance obligations will have an impact on all services subject to the reverse charge mechanism. After the changes, such services shall be reported in proper periodical lists similar to the European Sales Listing used to report intra-community supplies of goods.

An internal law (Law n. 88/2009, so called "Comunitaria 2008") has delegated the Italian government to receipt the EU Directives n 2008/08, 2008/09 and 2008/117. To enforce the new rules in Italy, a specific law provision shall be approved to modify the internal VAT law by the Parliament.

Considering that after the changes services will be, as a general rule, liable for VAT in the country of establishment of the customer (acting within its own business activity), VAT charged outside of their country of establishment will generally be reduced. As a consequence, the cash flows associated with output VAT and the administrative burden associated with VAT recovery procedures in foreign countries will be generally reduced.

Furthermore, for some specific service providers, such as transport companies or agents and intermediaries who are facing different local rules enforced in member states for this kind of services, the new rules on place of supply significantly simplify the management of their transactions for VAT purposes.

Directive 208/8 gives the possibility to member states to apply the so called "use and enjoyment rule" according to which the place of supply of a service is in the member state where the service is used and enjoyed.

In some cases, it could be hard to verify if such a requirement (more subjective than the place of establishment of the recipient) applies or not and therefore it may cause some disputes with the tax authorities. Italian VAT laws have already adopted such a rule which is applicable to quite a large proportion of services and this implied a number a disputes over the years.

The VAT changes under discussion are aimed at preventing, among other things, VAT frauds or abuses by means of the reverse charge mechanism for supplies of services. However, as fraud is one of the major concerns for the correct functioning of the European market, a wider, targeted reverse charge system could be applied in relation to particular fraud-sensitive sectors or to certain goods. Italy already provides the reverse charge mechanism for a limited list of goods. The European Commission issued a proposal on September 29 2009 for amending Directive 2006/112/EC about how the reverse charge mechanism applies to certain supplies susceptible to fraud.

1. Identify the nature of the customer, if it is a VAT taxable person or not. Services provided to private customers – or to individual entrepreneurs acting outside of their business – follow old rules;

2. Identify the actual nature of the services rendered, to determine if they follow the new general rules or fall into the list of exceptions;

3. Manage the new administrative burden, that is, the file of the reports of the services invoiced or received and to which the reverse charge method is applicable.

Federico Trutalli (f.trutalli@nctm.it) is a partner of NCTM in Milan

Latvia

The changes should simplify the system for most businesses that carry on cross-border operations so that 1) the supplier does not need to figure out the rules for registration in various jurisdictions and 2) the supplier will not be required to identify the status of the customer (that is, is the customer using the supply for taxable, exempt or non-business related activities.) Another positive aspect of the changes is the new cross-border VAT refund procedure which should provide for a more consistent process for obtaining cross-border VAT refunds. Changes in legislation may in some cases require adjustments in operating structures from a VAT optimisation standpoint. Additional VAT expenses may be incurred in cases where nonEU suppliers will be providing services to EU businesses. These transactions which, under the law, are deemed to be supplied in the country of the supplier, under the new regime will be deemed to be supplied in the country of the recipient and therefore subject to a reverse charge (for example this could apply to management services being supplied from the US to a subsidiary in an EU jurisdiction.)

Amendments to the VAT law were passed only on December 1 2009. As a result businesses were not given very much time to familiarise themselves with the changes in law. This is problematic to the extent that not enough time has been provided to make changes in planned operations and systems for taxpayers to apply the new provisions beginning from January 1 already.

The changes will help expanding operations across the EU as registration requirements will be simplified, requiring only registration in one jurisdiction. Also the simplified cross-border refund process should encourage cross-border activity, too.

Zinta Jansons: changes will help expanding operations

The new rules will place greater responsibility on taxpayers to ensure that their business partners are registered as VAT payers and act as such in the receipt of supplies. The new rules also introduce the concept of a fixed establishment and could cause disputes in terms of identifying whether a supply is being made to a customer or its fixed establishment in another jurisdiction. This concept of a fixed establishment appears to introduce the concept of a permanent establishment into VAT law.

The commission could consider introducing more specific requirements and , perhaps, procedures for VAT refunds. Whereas in some jurisdictions the process is streamlined and efficient, in Latvia businesses often find themselves battling with the tax authorities to obtain regular refunds. To some extent this is understandable because of the economic crisis the Latvian government faces. However, the problem existed before the crisis as well and the only solution was to begin litigating through the administrative courts which is a long and potentially expensive process.

1. Start collecting full information for regular vendors of services so information is available for new reporting requirements for the intra- EU supply of services.

2. Review agreements with customers/vendors to ensure that agreement terms do not conflict with new rules and applicable VAT charges.

3. Familiarise yourself with the new rules to ensure that all the changes are understood and addressed by your business.

Zinta Jansons (zinta.jansons@lawin.lv) is the head of the tax practice at Klavins & Slaidins LAWIN in Riga

Lithuania

To implement the provisions of the EU directives regarding VAT in 2010 into Lithuanian legislation, the Ministry of Finance introduced certain amendments of the Lithuanian Law on VAT in September 2009, which are being revised by the Parliament.

To start with, the most prominent advantage of these changes is their potentially positive impact on the cash flow of entities, since a business that is required to pay VAT to service providers located in other EU member states shall be able under the new rules, to apply reverse charge on those services.

In addition, particular VAT taxation procedures shall be simplified, that is, entities will be allowed to choose whether or not to calculate and deduct VAT from received advance payments. Moreover in certain cases, issuance of VAT invoices will not be required when provided services are subject to a zero-rate VAT or are not subject to Lithuanian VAT at all. Therefore, there shall be less of an administrative burden.

One of the drawbacks of the newly introduced amendment is that any business process or computerised system shall need to be analysed before the changes come into effect as most systems with any kind of pre-programmed VAT logic are likely to need modifications to a greater or lesser degree. In addition, accounting and any related software used for issuing invoices and filing VAT returns shall have to be changed to avoid situations whereby services are taxed VAT twice or VAT is not imposed at all.

Systems will have to be modified to perform proper calculations and run the right reports, which later on shall have to be filed with the tax authorities. Even though the amount of the necessary changes depends on the company size, substantial amounts of time and effort will be required to get it right. Therefore businesses with complex supply chain operations and complex selling models will face the biggest impact.

Another disadvantage is that taxable persons shall have to report not only transactions related to the supply of goods to other EU member states, but reports on services provided to taxable persons in other EU member states shall have to be filed as well, which means that the administrative burden will increase for local businesses, as the amount of reports will increase significantly. It is also worth mentioning, that the reports will have to be filed with the tax authorities on a monthly basis, which shows that it will also be time consuming.

Amendments to the Lithuanian Law on VAT will come in force from 1 January 2010. It is important to note, that various new accompanying legal Acts shall have to be adopted and the old ones will have to be adjusted, after the amendments of the Law on VAT are adopted.

Local legislation about simplified procedures of VAT refund from foreign taxable persons and filing of reports on services provided in other EU member states will have to be prepared, as well as legal Acts determining particular cases where issuance of VAT invoices is unnecessary if the provided services are subject to zero-rate VAT or are not subject to VAT at all, and those defining VAT refund constraints on taxable persons incorporated in third countries. Lithuanian entities shall be required to revise their agreements on provision of services as they will have to conform to the new provisions of the Law on VAT. Not to mention that they will have to analyse the structure of supplied and purchased services, determine which service will be taxed differently and ascertain how the new treatment will affect the issuance of invoices, the accounting for sold and purchased services and filing of VAT returns.

Vitas Vasiliauskas: time and resources will be required to gain knowledge about VAT rules

As the Lithuanian tax authorities will supervise the refund of the VAT paid in other EU member states, the refunds procedure of will be significantly simplified, in this way lowering the administrative burden on the local businesses, as less documentation and time resources shall be necessary. The Lithuanian tax authorities shall be responsible for the refund of VAT paid in other EU member states. However it should be noted that potential risks are arising as well, because local legislation has not been adjusted to meet the provisions laid down in the EU directives. So, the procedure of VAT refunds may become more confusing after the accompanying legal Acts will be introduced and adjusted, even though the refund procedure shall be implemented in a centralised way.

As the Lithuanian Law on VAT is being significantly amended and the basic rule of the place of supply of services is being radically changed, most potential conflicts between the tax authorities and the taxpayers may arise because of the lack of practical knowledge on the part of taxpayers. It is important to mention that time and resources will be required for the taxpayers to gain the practical knowledge about the proper application of the new VAT rules.

On October 22 2009, the European Court of Justice (ECJ) delivered a judgement in a case referred from the German Federal Tax Court, concerning the VAT treatment of a portfolio transfer of both the primary and reinsurance businesses. The background to the case was that an entity had transferred a reinsurance portfolio to an affiliated entity. The European Court firstly confirmed that the portfolio transfer of insurance and reinsurance business constitutes a taxable supply of services (even though, insurance itself is not subject to VAT) and in general is subject to VAT. This ECJ judgement may lead to discussions and initiatives by the EC about changes to the taxation of transfer of business.

To deal with the new rules more easily, it is advisable to provide additional training and guidance documents to avoid mistakes. To avoid additional tax risks, Lithuanian entities supplying and purchasing services from entities established in other countries, should accordingly prepare for the upcoming changes, provide additional training to their employees if necessary, and familiarise themselves well with the new provisions.

Vitas Vasiliauskas (vitas.vasiliauskas@lawin.lt) is a lawyer with Lideika, Petrauskas, Valiunas LAWIN in Vilnius

Norway

What are the strengths and weaknesses of the changes?

The new rules will ensure that VAT on services is accrued to the country where the consumption takes place to a higher degree than under the previous system. There will be more efficient procedures for VAT refunds to non-established businesses

The member states may implement use and enjoyment rules, with the result that the VAT treatment of the same intra-community supply may differ from member state to member state.

Compliance costs may increase due to new burdens, among other things, to report transactions through the EC Sales List.

As Norway is not a member state of the EU the VAT Package will not be implemented in Norway. With effect from 1 July 2001 a limited reverse charge scheme was implemented in the Norwegian VAT Act. The reverse charge mechanism applies only to services rendered from foreign suppliers (whether established in the EU or not) and the reverse charge mechanism is only applicable for services that are "capable of delivery from a remote location". The term "capable of" also implies that a service that is in fact physically supplied in Norway may be subject to VAT reverse charge in Norway if the service would have been capable of such remote delivery. For example, the services rendered by a Dutch counsel in a meeting that takes place in Norway with his Norwegian client, should be reported [as a] reverse charge by the Norwegian client. Some exemptions from the reverse charge scheme applies, for example, for business-to-consumer (B2C) telecommunications services.

The criterion "services capable of delivery from a remote location" is also applied to the VAT treatment on the export of services. A Norwegian service provider must assess whether his customer is in business or performs public sector activities (business-to-business, B2B) or acts as a private person (B2C). An intangible service rendered B2B to a foreign business/public body will in general be VAT exempt if the criterion is met. A similar supply B2C will normally be subject to VAT, as the criteria for VAT exemptions in such cases is that the service is for the full use and enjoyment outside of Norway. For the time being, the Norwegian VAT Act seems to conform more or less with the VAT Package, which is underscored by the fact that a new Norwegian VAT Act will come into force from January 1 2010, and that this new Act is principally only a technically revised version of the VAT Act of 1969.

The reduction of the charges of cross-border VAT within the EU will improve liquidity for businesses and reduce administrative costs related to the application for VAT refunds from other member states. The procedures for retrieving cross-border VAT will be simplified and more efficient and thus also reduce the impact on liquidity.

Nils Flesland Bull: use and enjoyment rules may increase complexity

The assessment to be made by the service provider of the customer's status in relation to the use of the service provided (that is, assessing whether a taxable person is acting as such or not) may prove to be a real burden for a number of taxpayers. The same applies to the required assessment of whether the service is subject to an exemption or not in the member state of the purchaser, which is prerequisite for the completion and filing of a correct EC Sales List. Penalties and/or supplementary taxation resulting from such errors in reporting may be areas of future conflict between taxpayers and tax authorities.

The option for implementing local use and enjoyment provisions may increase the complexity of the system. The European Commission should consider the need for more uniform provisions, or at least, to increase the accessibility of the various use and enjoyment provisions of each member state.

1. Be aware of and monitor the implementation of the VAT Package in the member states of your business' European footprint.

2. Check whether relevant member states have implemented particular use and enjoyment provisions that will have an impact on your transactions. For example, the VAT treatment of a sale from a Norwegian supplier using its local subsidiary to make supplies to the local affiliate of a Norwegian headquarter may change with the implementation of such use and enjoyment provisions.

3. Be aware that your enterprise resource planning system and book-keeping software may not be updated and may not conform with the new rules on place of supply and VAT liability. To handle the EC Sales List requirements, all Norwegian businesses with operations in the EU should take immediate steps to ensure that necessary updates are in place before January 1 2010.

Nils Flesland Bull (n.bull@haavind.no) is a principal associate of Haavind in Oslo

Portugal

Strengths are the simplification and standardisation of VAT regulations concerning the supply of services between residents and nonresident entities, and the VAT refund procedures. The main weaknesses of these rules are associated with the implementation of new procedures, which will take time to be acknowledged by both Portuguese VAT taxpayers and the Portuguese tax authorities.

The transposition of Directive no 2008/8/EC of February 12 and Directive no 2008/9/EC of December 16 into national law was made through Portuguese Decree-Law no 186/2009 of August 12, which significantly amended the Value Added Tax (VAT) Code, the VAT system for Intra-Community Transactions (RITI) and applicable supplementary legislation. This decree-law also approved the new VAT refund scheme for taxable persons established in another member state or outside the community.

The implementation of these measures in the Portuguese jurisdiction determined, in particular, the introduction of quite a significant number of new VAT procedures, (for example, concerning the Portuguese VAT periodic assessment which was divided into two declarations).

The implementation of simpler refund procedures by employing electronic resources for receiving and processing new VAT refund requests is one. It extends the deadline for submitting requests (which can now be submitted up to September of the calendar year that follows the year in which the tax became chargeable, instead of the deadline now, which ends on the last day of the month of June), in addition to reducing the decision period to four months (instead of six months now). Also, the standardisation of self-assessment VAT rules concerning the supply of services executed between Portuguese VAT taxable persons and nonresidents (VAT taxable persons in an EU territory) shall certainly reduce the VAT refunds requests presented in Portuguese territory (by these nonresidents) and increase buyers' cash flows, as they shall obtain VAT refunds within a shorter period of time.

The implementation of these new rules carry out new procedures for Portuguese VAT taxpayers, which (although they are considered simpler procedures) will take some time to be perfectly recognised by all entities, including the Portuguese tax authorities. The acknowledgement of all new rules and procedures, even by the Portuguese tax authorities, will certainly be an area of potential conflict between tax authorities and taxpayers. Portugal's tax authorities are quite formal when approaching these subjects and tend to have a quite strict position towards the implementation of new rules and new procedures, eventually penalising taxpayers who do not have a good awareness of the new regulations.

Amendments concerning the VAT regimes applicable to telecommunications and effective use of assets, deriving from EU directives already approved, are expected to occur soon. And there is an extensive discussion (including at a political level) in Portugal about the implementation of a VAT regime based on cash payments. It is thought the directive proposal COM (2009) 21, from January 28 2009, concerning invoicing rules, shall be the object of particular attention by Portuguese entities.

The main tip for taxpayers is to know the new rules and procedures perfectly. That will allow full compliance and maximisation of the possibilities offered by these new VAT regulations.

André Gonçalves (abg@aaa.pt) is a principal associate of AAA in Lisbon

Romania

Considering that the place of supply shall be, as a rule, the place of the beneficiary legal entities, the beneficiary shall no longer pay VAT to the services provider and then require the refund of such VAT in another member state. As regards VAT refunds, the Romanian fiscal code contains the necessary provisions to allow the refund of VAT paid in Romania by other EU entities not registered for VAT purposes (and are not required to be registered) for imports and acquisition of goods/services. The rules also apply to non-EU based entities if a Romanian entity would be entitled to require a VAT refund in the country of origin of such non-EU entity.

A potential weak point is that methodological norms (meant as norms setting out detailed rules for application of the implementing legislation) were not yet issued almost a month since the implementing legislation was issued and hence, a lack of clarity of such methodological norms may lead to various misinterpretations or incorrect application both by the taxable persons and by the fiscal authorities of the new rules.

In view of implementing Directive 2008/8/CE amending Directive 2006/112/CE on services' place of supply (Directive 8), Directive 2008/9/CE on certain detailed norms on VAT refunds to taxable persons established in member states other than the member state where the refund is due (Directive 9) and Directive 2008/117/CE on a common regime of VAT to fight tax evasion in connection of intra-community operations (Directive 117) the Romanian government adopted Government Emergency Ordinance no 109/7.10.2009 amending the Fiscal Code and published in the Official Gazette no. 689/13.10.2009 (GEO 109/2009) whose provisions will be applicable as a rule from January 1 2010, except for the provisions related to the harmonised excise regime, which shall apply from April 1 2010.

Directive 8, dealing with the place of supply provisions, along with particular provisions about, for example, immovable property, supply of transport as well as the provisions about supply of services to non-taxable persons outside of EU and about prevention of double taxation and non-taxation were all implemented by GEO 109/2009. The other provisions of Directive 8 shall be applicable from January 1 2011 (place of supply for cultural, artistic, sporting and other similar services), January 1 2013 (place of supply for means of transport hiring) and January 1 2015 (place of supply for telecommunications, broadcasting and electronic services) and hence, were not yet implemented. Directives 9 and 117 were implemented by GEO 109/2009 and shall be better detailed and clarified via the methodological norms which are expected to be enacted by the end of 2009.

In terms of change of place of supply, the most important opportunity is the fact that providing services to other EU member states shall be taxable in the beneficiary's state, giving the latter the opportunity to provide evidence easily of the deductible tax in its VAT statements without having to claim the paid VAT from the service provider's home state. Furthermore, this new VAT treatment for place of supply better clarifies the provisions of the Fiscal Code about the person responsible for VAT payments for services provided by taxable persons established outside Romania.

Moreover, by implementing the new provisions of Directive 9 on VAT refunds for non-Romanian based persons, since the fiscal climate will improve, foreign entities will be encouraged to develop their business in Romania without the need to register for VAT purposes, allowing such persons to recover the VAT paid in Romania in a more proficient manner before January 1 2010.

Additionally, persons which were registered by mistake for VAT or which no longer perform activities with the right of deduction now have the legal framework to require deregistration for VAT purposes.

A potential debate between tax authorities and taxpayers may arise after publication of Methodological Norms if they will not provide all details, especially with regard to VAT refunds, to non-Romanian entities which are not registered for VAT purposes.

Iuliana Craiciu: Conflict between domestic and EU may hamper application

A particular comment should also be made about the generating event for deliveries of real estate. GEO 109/2009 provides that the delivery date will be the date when the right to dispose of the asset as owner is transferred (which in most cases in Romania is the date when the SPA is closed before a public notary and the legal ownership transfer is made), while the European Court of Justice case law refers to the date when the purchaser may dispose of the asset as owner "even if there is no transfer of legal ownership of the property". This conflict between domestic and EU legislation may create further application issues.

1. To avoid any delays in having VAT refund requests settled, nonRomanian based entities should avoid being fined by the Romanian state or if this happens to pay the relevant fine. This is because under the new rules, VAT refunds requests are suspended if there are any fines due and not paid.

2. To exercise the deduction right in Romania without facing the risk of reconsideration of these deductible amounts in the case of tax audits, the taxable person should, at any time, hold an invoice issued in accordance with the Romanian fiscal code or VAT customs with documentary evidence that the VAT was paid.

3. In case of intra-community acquisition of goods taxable in Romania, the EU-based entities may either register themselves for VAT purposes in Romania or appoint a fiscal representative, while nonEU-based entities must appoint a fiscal representative who shall be obliged to pay the relevant VAT.

Iuliana Craiciu (iulianac@musat.ro) is a partner of Musat & Asociatii in Bucharest

Switzerland

Switzerland is not a member of the EU. Therefore, it is not obliged to follow EU rules and there is no double taxation treaty for EU VAT. However, in summer 2009 the Swiss Parliament passed the VAT Act reform bill on the final vote. The new VAT Act will come into force on January 1 2010 and will completely replace the existing VAT legislation. It contains significant changes in key areas of VAT. The major changes in the EU VAT package regarding the place of supply rules are reflected in the new Swiss VAT Act. As in the EU, according to the new default rule, the place of taxation is in the country in which the customer is established or has a fixed establishment to which the services are rendered.

European Union suppliers providing services to Swiss customers have to consider that the place of supply rules in the Swiss VAT Act 2010 are only partially harmonised with the EU VAT package. The Swiss place of supply rules do not distinguish between business-to-business (B2B) and business-to-consumer (B2C) transactions. Furthermore, the qualification of services within the scope of the list of exceptions set out in the Swiss VAT Act will differ in many instances from the qualification defined in the EU VAT Package. The new Swiss place of supply rules will make it easier to determine the correct VAT treatment. Furthermore, double taxation will decrease according to the new system. Many cross-border services to Swiss recipients or by Swiss suppliers will be invoiced without VAT as from 2010. Those business customers who have previously suffered negative cash flow and administrative costs associated with cross-border VAT refunds will benefit from the new system.

As previously mentioned, the new place of supply rules are one of the key elements of the Swiss VAT reform.

With regard to cross-border services there are new planning opportunities in relation to Switzerland. Owing to the complete revision of the Swiss VAT Act, some critical changes in the European VAT Package could be mitigated for cross-border supplies to Swiss customers.

For example, partly exempt businesses such as Swiss resident banks and insurance companies receiving zero-rated services from abroad may face extra costs (irrecoverable reverse charge VAT) on outsourced services, according to the new rules. As from 2010, the Swiss VAT Act includes new substantive criteria for the determination of what is an exempt supply. Therefore, it may well be that specific services which have been outsourced to foreign (EU) service providers do not have to be reverse-charged by the Swiss recipients, due to the Swiss VAT qualification as exempt supplies.

Furthermore, head office and branches of a company will be, as at present, regarded as separate taxable persons for Swiss VAT purposes for cross border intra-company services and charges. This different qualification compared to the EU position may create planning opportunities for exempt and partly exempt businesses.

As from 2010, the force of attraction issues could lead to conflicts with the tax authorities. For example: when does a fixed establishment of a business intervene in a supply? According to EC and Swiss legislation, local VAT is not due from a fixed establishment within the territory of its customers unless that establishment plays an "active role" in supplying the services concerned.

Furthermore, global contracts will continue to be problematic as regards the correct determination of the place of supply. To determine the place of supply of a global contract, there needs to be distinction between a global contract that forms a single supply for VAT purposes and a global framework agreement, often between the head office and a supplier, which sets out the terms for a number of individual supplies. From 2010, the question arises as to whether the supplier will need to invoice (part of) the global fee directly to the local branches/subsidiaries charging local VAT or if the service is reverse charged by the overseas head office.

Christina Rinne: force of attraction issues could lead to conflicts with tax authorities

Since the place of supply rules in the new Swiss VAT Act do not distinguish between B2B and B2C services, Swiss taxpayers do not face the difficulties of EU suppliers who have to ascertain the status of their customers. Moreover, since Switzerland is not an EU member state, Swiss suppliers operating exclusively from Switzerland are not required to report cross-border services in the EC Sales Lists.

Legal certainty is one of the most crucial factors for taxpayers. With regard to pan-European VAT planning, taxpayers always face two issues:

• Not all aspects of the EU law are mandatory, that is, each member state can choose to implement some aspects of EU VAT law.

• As a result of both direct derogations from EU law as well as local interpretation and practice, taxpayers are often faced with local variations in the VAT treatment.

Even though it is challenging to harmonise law and practice fully throughout the EU businesses would welcome it.

Even though this is not new, it is worth mentioning this important difference in the reverse charge application for overseas suppliers: In Switzerland there has to be a distinction between overseas suppliers already VAT registered in Switzerland and those who are not VAT registered, both providing either services falling under the new default rule or non-default rule services (the latter with their place of supply within Switzerland): The Swiss recipient of such services has to operate the reverse charge for the services received from an overseas supplier, unless the latter is registered for Swiss VAT purposes. In other words, in contrast to the EU legislation, the foreign supplier has to invoice such services with Swiss VAT once he is VAT registered; the reverse charge must no longer be applied.

In addition, overseas suppliers providing telecommunications and (new) electronically supplied services to consumers (B2C) must register for Swiss VAT from 2010 onwards if the registration threshold (raised from Sfr75,000 ($75,000) to Sfr100,000 from January 1 2010) is exceeded. Watch out for how each member state and also Switzerland will implement "use and enjoyment override" rules that could result in the retention of cross-border VAT charges.

Christina Rinne (christina.rinne@pestalozzilaw.com) is a partner of Pestalozzi in Zurich