How to determine the location of the consumer?

If we can not match the information about customer residence and customer vat we apply th VAT from UK because we must presume that the customer live in UK.

As the rules (

The place of supply of cross-border digital services is the consumer’s location, which is determined by where the consumer usually lives.

For example, for a UK expat living in Spain the location would be Spain.

Place of supply ‘presumptions’

To try to simplify the rules for some supplies of digital services, we make a presumption about the place where the customer is to be taxed.

This in turn means that where a digital services supply is made through one of these locations, the business supplying the service does not need to get any additional evidence to justify in which member state the VAT is due.

Types of supplies covered by the presumption rule include where the digital service is supplied:

  • through a telephone box, a telephone kiosk, a wifi hotspot, an internet café, a restaurant or a hotel lobby (VAT will be due where those places are actually located, so if a German tourist makes a call from a telephone box in the UK, VAT will be due in the UK)
  • on board transport travelling between different countries (VAT will be due in the place of departure, for example, if a ferry operator provides a wifi hotspot on board ship which is available to passengers for a fee, VAT will be due in the place of departure and will not depend on a passenger’s place of residence)
  • through a consumer’s telephone landline (VAT is due where the consumer’s landline is located)
  • through a mobile phone (the consumer location will be the country code of the SIM card, so if a UK resident downloads an app to their smartphone while on holiday in Italy, VAT will be due in the UK)
  • in the country for the postal address where the decoder is located or the viewing card is sent (if a UK resident has a satellite television system in their Spanish holiday home, VAT will be due in Spain)

Circumstances where the presumptions do not apply

When these circumstances do not apply, you must get and keep evidence to show which country your consumer is normally located in.

Examples of the type of supporting evidence that tax authorities will accept include:

  • the billing address of your consumer
  • the Internet Protocol address of the device used by your consumer
  • your consumer’s bank details
  • the country code of the SIM card used by your consumer
  • the location of your consumer’s fixed landline through which the service is supplied
  • other commercially relevant information – for example, product coding information which electronically links the sale to a particular jurisdiction

Businesses using payment service providers

A business which makes cross-border digital service supplies must get and keep 2 pieces of information as evidence of where a consumer normally lives.

This shows that the correct rate of VAT has been charged and will be accounted for to the correct tax jurisdiction.

For many micro and small businesses this requirement may be challenging. For micro and small businesses that use payment service providers, try the following approach:

  • at the point of sale, ask the consumer for details of either their:
    • billing address, including the country
    • telephone number, including the country dialling code
  • when the consumer pays for the digital service, we’ll need to get from the payment service provider a notification advice containing the 2-digit country code of the consumer’s country of residence as listed in their records

If the 2 pieces of information match, that’ll be enough to define the consumer’s location and we can record the details in our accounting records.

If the information does not match, you must contact the consumer and ask them to resolve the discrepancy between the 2 pieces of information.

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