VAT on services supplied abroad: the place of supply

When you invoice services abroad, the tax treatment is determined by the concept of the place of supply. It decides how VAT on services supplied abroad is applied and who pays the tax. The rules differ depending on who you provide the service to and what kind of service it is. In this article we explain the basic logic and the most common cases you will come across in practice, so that you avoid incorrect invoicing.

Why the place of supply is key

The place of supply determines the country in which the service is taxed. If this place is outside Slovakia, you usually do not charge domestic tax, and the tax is dealt with in another country, usually by the recipient. Determining the place of supply incorrectly is one of the most common and most costly mistakes with cross-border services, because it leads either to tax being charged without justification or, conversely, to tax not being paid. The first step with every cross-border service should therefore be a thorough assessment of who the recipient is and where exactly the place of supply of the service is, and to do so before the invoice is even issued.

Services for businesses

When you supply a service to a taxable person in another country, the basic rule is that the place of supply is where the recipient has its registered office. The tax is then usually paid by the recipient under the reverse charge, and you invoice without tax, with the appropriate note on the invoice.

• check whether the recipient is a taxable person
• check that its VAT identification number is valid
• include a note about the reverse charge on the invoice
• report the supply in the EC Sales List if the recipient is in an EU state

Services for non-business customers

If you provide a service to an end consumer, the basic rule is that the place of supply is where you, as the provider, have your registered office, and you invoice with Slovak tax. However, there are numerous exceptions, for example services connected with immovable property, passenger transport or electronically supplied services, which have their own rules and can shift the taxation to another country.

Special rules and exceptions

Some services have their own rules regardless of the status of the recipient. These include services connected with immovable property, cultural, educational and sporting events, and the hire of means of transport. For these services, always check the specific classification and place of supply, because they differ from the basic rules and getting them wrong can have a direct tax impact.

Documents and records

With cross-border services, it is important to have documents that prove the status of the recipient and the place of supply. Keep records of your VAT identification number checks, contracts and orders in case of an audit. With services to end customers abroad, also keep an eye on whether you are becoming obliged to deal with tax in another country or to register for one of the special schemes.

A practical summary

Assessing VAT on services supplied abroad correctly means first determining the status of the recipient and then the place of supply according to the type of service. In more complex cases, it pays to consult an adviser, who will prevent mistakes in the return and the statements and save you any penalties or additional tax assessments. Investing in the correct assessment right at the start is almost always cheaper than later correcting several periods and dealing with the tax office.

Related articles: VAT registration under Sections 7 and 7a explained, VAT on sales of goods to the EU: OSS and distance sales, Input VAT deduction: conditions and the most common mistakes.

Frequently asked questions

Do I invoice a service to a company in the EU with or without tax?

If the recipient is a taxable person and the place of supply is in its country, you usually invoice without tax with a note about the reverse charge, and the recipient declares the tax. However, check your partner’s status and the validity of its VAT identification number.

Does the reverse charge also apply to services outside the EU?

The basic logic of the place of supply also applies to third countries, but the specific application depends on the type of service and the rules of the country concerned. It is advisable to assess such cases individually with a tax adviser.