Place of supply for VAT purposes

Place of supply for VAT purposes

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I am starting up a UK company that will be selling downloadable software across the EU. This is effectively a reseller business, because the software itself will be downloaded from the original developers in the US.

I understand that if the software were to be downloaded from the UK in another EU country, then the place of supply would be the UK with all the VAT implications arising from this. Does the fact that the software is being resold make a change to the place of supply? If so, how should sales by the UK company to other EU countries be treated for VAT purposes?

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By Coeus
25th Jan 2012 21:23

Hi dzseti.

 

I have copied two links at the bottom of the page relevant to your question to print and review for your records and understanding. The first link is an overview of the topic in hand and the second link is a flow chart you may find useful for supplies of electronic services to the EU.

 

The accounting for the VAT on sales to the EU depends on whether the EU supply of the electronic service (of which software is classified) is: (i) B2B (business to business) or (ii) B2C (business to consumer).

 

With BRB sales the 'place of supply' (the key element in these desicisions) is where the customer belongs (the EU country you are supplying to). In this situation the supply of the service is outside the scope of UK VAT however is still reported in box 6 of the VAT return. The EU business customer should account for the purchase under the reverse charge rules.

 

With B2C sales the 'place of supply' is where the supplier belongs (your business in the UK). In this situation the sale is within the scope of UK VAT and thus reported in boxes 1 and 6 of the VAT return.

 

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.por...

 

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.por...

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By ashohid
30th Apr 2012 01:02

VAT on software supplied to EU reseller

Hi all

My UK based VAT registered client company develops and sells bespoke business software to a Republic of Ireland based reseller (also VAT registered).

 

The nature of the software means that it will only ever be sold onto business customers.

 

However, the reseller will not be using the software itself and my client may not know where the ultimate customer is based as the reseller may sell throughout the world.

 

Am I over complicating things and should the sale simply be to Ireland? i.e. zero rated with reverse charge to be applied by the Eire based reseller as the customer?

 

The reseller does provide a sales list upon which the royalties are based, should the place of supply be based on the ultimate customer on this list?

 

In short, is the reseller the customer or is it the ultimate customer the customer?!

 

Also, how important is it for the supplier to state "This supply is subject to the reverse charge" on the invoice?  Is it not for the customer to figure out whether reverse charge applies?

Many Thanks

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