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VAT Update on the changes as from 1 January 2010 in relation to the following matters

The matters are:

1. Changes to the country of taxation of services provided from business to business.
2. Compliance obligations for persons who supply services and goods.
3. Changes in the time of supply of services for which VAT is due by the recipient.
4. Procedure for refund of VAT paid in another Member State.
5. Changes to the country of taxation of services, supplied from business to consumers.

1. Services provided between from business to business

These changes apply for all services except from the ones stated below:
(a) Services which are directly related to immovable property
(b) Restaurant services and services supplied in the course of catering
(c) Leasing of means of transport
(d) Scientific and educational services
(e) Sporting and cultural services

2. Compliance Obligations

As from 1 January 2010 businesses are required to complete and submit a declaration for intracommunity supply of services which are taxed under the reverse charge provisions in another Member State. The services which must be included in this new declaration are solely the services which will be taxed for VAT purposes in the other Member State. Services which are supplied to persons established outside the EU must not be included.

Services which are exempt from VAT in the country of the recipient must not be included in the new declaration for intra-community supply of services. Consequently these rules require businesses to have a full understanding of the VAT treatment of the services in the Member State of the recipient.

The new declaration shall be submitted on a monthly basis. In accordance with the provisions of the proposed legislation the declaration will be submitted by the tenth day of the month which follows the month for which it relates.

As from 1 January 2010 the VIES returns for intracommunity supply of goods must also be submitted on a monthly basis. These returns are currently submitted on a quarterly basis. The VIES declaration for intercommunity supplies of goods will also need to be submitted electronically.

3. Changes in the time of supply of services

The time of supply of services which are subject to VAT by the recipient under the reverse charge provisions shall as from 1 January 2010 be the earlier of the:
(a) date in which the supply of the service was competed, and
(b) date of payment

In the case of supply of services continuously over a period more than one year, for which no obligation for periodic payments exists, the VAT will be due at the end of calendar year. The VAT that will be due will be the VAT which is attributable to the value of the service provided.

4. Refund of VAT paid in another MS

As from 1 January 2010 the existing procedure for refund of VAT paid in another MS will be replaced with a new electronic procedure.

The purpose is faster refund of the VAT to the claimants. In addition in case of delay in the refund of the VAT by a MS, interest will be paid to the business for the period of the delay. The deadline for the
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submission of the claim for VAT refund is extended by 3 months from 30 June of the next year to 30 September.

5. Services supplied to from business to consumers

The general rule will continue to be that the place of taxation of services is the place where the supplier has established its business. However, if the services are provided from a fixed establishment in a place other than the place where the supplier has established its business, the place of supply will be the place where that fixed establishment is located.

There will continue to be exceptions to this general rule. These are based largely on existing criteria and the principle of taxation at the place of consumption.

6. Actions that need to be taken

Companies which supply services to business persons established in other Member State must assess the impact that these changes will have on their activities. In addition businesses must ensure that their accounting systems can provide the information required for the preparation of the new declaration.

In addition companies which carry out intracommunity supply of services which are subject to VAT by the recipient or perform intracommunity supplies of goods must ensure that they will be able to submit the declarations VIES II and VIES electronically within the 10 day deadline.

For further information on this topic please contact Mr. Soteris Flourentzos, Director, by telephone (+357 25 028460) or by fax (+357 25 028461) or by e-mail (sflourentzos@pittaslegal.com)