The Organization for Economic Cooperation and Development (OECD), in newly-published 2017 Guidelines for VAT/GST, has opined on how they believe VAT should be assessed on services and intangibles. Their primary recommendations are that countries adopt regimes which:
1. Tax services and intangibles at the place of consumption;
2. Tax business-to-business (B2B) transactions at the location where the service/intangible is used;
3. Apply a “reverse charge” for cross-border B2B transactions, shifting liability to the purchaser;
4. Tax business-to-consumer (B2C) transactions at the place where the consumer resides; and
5. Adopt simplified registration requirements for non-resident suppliers of B2C services and intangibles.
These guidelines are part of a continuing conversation on VAT and the digital economy, which was kick-started in 2013 by the OECD’s publication of its Action Plan on Base Erosion and Profit Shifting.
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