Centre for Tax Policy and Administration

OECD to work on clarifying VAT/GST application in cross-border trade


23/02/2006 - The OECD is launching a new project aimed at providing guidance for governments on applying Value Added Taxes, or VAT - also called Goods and Services Tax, or GST, in some countries -- to cross-border trade. Pending completion of this project, OECD countries have agreed on two fundamental principles for charging VAT/GST on internationally traded services and intangibles:

  • For consumption tax purposes internationally traded services and intangibles should be taxed according to the rules of the jurisdiction of consumption;
  • The burden of value added taxes themselves should not lie on taxable businesses except where explicitly provided for in legislation.

The proposed guidelines are needed in today’s environment of rapidly increasing international trade, particularly in the area of services and intangibles, because a current lack of international “rules of the game” can lead to double taxation or unintentional non-taxation.

What is more, businesses may be dissuaded from making investment or trading decisions because of the uncertainties in the application of these taxes. For their part, tax administrations struggle with applying the tax on international transactions where there are no internationally agreed rules.

The proposed International VAT/GST Guidelines will be developed by OECD governments, drawing on input from business and from non-OECD economies, with a view to addressing these and other problems (many of which were highlighted in a 2004 OECD report – “The Application of Consumption Taxes to the International Trade in Services and Intangibles”).

The immediate focus of the new guidelines will be on services and intangibles. However, with trade in goods also becoming more complex for VAT and GST application due to developments in supply chain structures, the guidelines will also consider at a later date how the tax should best apply in order to achieve fair taxation and remove risks of double taxation in this area. The OECD’s Committee on Fiscal Affairs, which has overall responsibility for this project, has integrated the setting of standards and the provision of guidance in the consumption taxes area as part of its core work.

To see existing Guidelines that incorporate earlier OECD work on taxation and electronic commerce, and the framework for their planned future development, please see

For further information, journalists are invited to contact Piet Battiau, Centre for Tax Policy and Administration (tel. 33 1 45 24 95 91).


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