VAT treatment of electronically supplied services in Malta and in the EU

Abstract

This dissertation examines the VAT treatment of electronically supplied services generally, giving special regard to the special scheme available for non-EU operators of e-services, introduced following the shift in the place of supply for such services under Directive 2002/38/EC. This created a level playing field between EU and non-EU e-services providers by shifting the place of taxation from the place of establishment of the supplier to that of the customer on business to customer transactions. The key research objectives of this study include an interpretation of the structure of the registrations under the special scheme; an evaluation whether Malta stands to benefit from thee-services sector and factors influencing the decision by non-EU operators either to register under the special scheme or to establish themselves in the EU. Semi-structured interviews conducted with four leading tax practitioners supplemented the interpretative side of the research. Luxembourg and UK are the preferred Member States of identification by non-EU e-services operators. Influential factors include lack of language barriers and excellent customer service by tax authorities in favour of UK and the already existing good repute for Luxembourg. Although Malta stands to benefit from the e-services sector if local demand increases or a commission were to be charged on tax forwarded to other Member States where private customers are located, customer service could be enhanced to match that of UK tax authorities. The enforcement problem in enlisting non-EU operators and monitoring their activities is expected to persist unless a simple declaration from private customer is forwarded to tax authorities directing attention where due.