Consumption tax

Second Consultation Paper on Applying Value Added Taxes to Cross-border Supplies of Services and Intangibles


In January 2008, as part of its work in developing the OECD International VAT/GST Guidelines, the OECD published its first consultation paper on the fundamental concepts of applying value added taxes to cross-border supplies of services and intangibles. Comments received in the light of that consultation were supportive of the suggested OECD approach of taxation where the customer is located. Some commentators queried the distinction between services and intangibles. Unlike in the European Union, where there are just two categories of supplies (goods and services) for VAT purposes, some OECD countries have other categories such as intellectual property rights and other intangibles. For ease of reference we refer to these as “intangibles” and treat them as services for the purposes of this work.


The OECD is now publishing its second consultation document. This expands on the first paper in that it covers examples of supplies made under international framework agreements. The main conclusions illustrate that although supplies may be made within the framework of international agreements, the customer location, as supported by the business agreement, continue to give a satisfactory outcome for determining the place of taxation for each transaction. As a result, the actual taxation of such supplies can be purely domestic.


As with the first consultation document, it is stressed that the examples used assume that all supplies are bona fide with no fraudulent or other abusive intent. Further, supplies are between separate legal entities rather than between parts of the same entity (e.g. branches).


This consultation paper has been prepared by a Technical Advisory Group consisting of representatives from governments, business and academia. The paper was approved, for the purposes of this public consultation, by the OECD’s Committee on Fiscal Affairs.


This document is published for consultation with all parties interested in the application of VAT/GST on internationally traded services and intangibles. It is not intended to be part of the International VAT/GST Guidelines themselves but to allow for interested parties to contribute to the debate, to collect relevant information and to help the OECD develop its thinking in this area.
This document does not necessarily reflect the views of either the OECD or of its member countries.

Comments are now invited. Please ensure that comments are sent to and by Friday 17 October 2008.




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