Electronic services can encompass a diverse range of offerings, including website supply, web hosting, remote maintenance of software and hardware, software supply and updates, supply of images, text, and information, database access, and the supply of music, films, and games (including gambling and games of chance).
It should be noted that electronic services can also include broadcasts of entertainment and events related to political, cultural, sporting and scientific nature to name a few.
Electronic Supplied Services (ESS) to a taxable person within or outside the European Union
To understand the VAT treatment of electronic supplied services, we would need to understand the place of supply rules. In the case of electronic supplied services, the place of supply is always the location of where the customer is based.
A taxable person is generally understood to be anyone engaged in an economic activity, regardless of the purpose or outcome of that activity. The supplier is within their right to request documentary evidence, which is usually the customer’s VAT identification number, to validate if the customer is defined as a taxable person.
If you are registered for VAT in Malta under Article 10 and you are supplying electronic supplied services:
- VAT should be charged on electronic supplied services to any person deemed a taxable person who is established and carrying out activities in Malta.
- VAT should not be charged on electronic supplied services to any customer who is established outside the EU or is deemed taxable persons established in another EU member state. (There may be a reporting requirement).
ESS to a non-taxable person within or outside the European Union
The place of supply for non-EU customers is also where the customer is based. On the other hand, for customers within the EU, the place of supply is where the EU supplier is based.
If you are registered for VAT in Malta under Article 10 and you are supplying electronic supplied services:
- VAT should not be charged on electronic supplied services if the customer is based outside of the EU.
- VAT should be charged on electronic supplied services to any customer who is deemed to be a non-taxable person based in Malta or a non-taxable person based in another EU member state. (There may be a reporting requirement).
A person who provides electronic supplied services based outside the EU to non-taxable persons within any EU member state is usually required to be registered for VAT in the EU. However, there is a simplification in the process to avoid having the need for multiple VAT registrations across different member states, this is the Mini-One Stop Shop.
Mini-One Stop Shop
Under this scheme, a person is allowed to register for VAT in any EU Member State of their choice. The preferred Member State is referred to as the Member State of Identification.
The taxable person will then charge VAT at the rate of the Member State where the customer is established. Moreover, different VAT rates may need to be charged depending on the various Member States where their customers are located.
How Can We Help
At Papilio Services, we have a specialist VAT advisor with a deep knowledge and understanding of the relevant Malta and EU VAT legislation. Our advisor has years of practical experience assisting clients with a range of VAT services in Malta, and the EU. Examples of these services can include simple VAT registration queries to more complex and specialist VAT issues such as cross-border supplies, bonded supplies, and importation of goods into the European Union.
We work with our clients to help them understand their VAT compliance obligations and manage the compliance risk. We can help with Indirect tax registration and de-registration, indirect tax refund claims and VAT reporting as well as helping the client break down transactions into smaller supply chain transactions so that they can assess their supply and likely indirect tax repercussions.
Contact us and we will arrange a consultation to understand your situation in more detail, so we are in a better position to advise you in the future.
About the Author
This article has been authored by Chanelle Mifsud, Manager of the Accounts Department.
