Kronospan Mielec sp zoo v Dyrektor Izby Skarbowej w Rzeszowie (Case C-222/09): the ECJ has confirmed that where R&D services carried out by engineers are supplied ‘on a contract basis for the benefit of a recipient established in another Member State’, they were ‘services of engineers’ and so the place of supply is the country in which their work is carried out, not the country in which the supplier is based. Given that VAT varies between 15% and 25% across the EU, describing the service correctly can make quite a difference in cross-border services.
In this case, Kronospan, a Polish company provided R&D services to a Cypriot company. The services were described as ‘research and development work relating to the environment and technology, carried out by engineers’.
Poland claimed that some of the services were ‘scientific activities’ - this would mean that the place of supply for VAT purposes was Poland and so Polish VAT (22%) should have been charged by Kronospan. The company disputed this and argued that the services were services of engineers, so that the place of supply was in Cyprus where the work was carried out, so that Cypriot VAT was due - at 15%.
The general rule on the place of supply of services for VAT purposes changed from 1 January 2010, so that the general rule is that services are supplied where the customer is based – but this remains subject to overriding provisions in certain areas, including cultural and scientific activities, and use and enjoyment provisions. It’s important to review exactly what is being done and to make sure that the contract is accurately depicting the services.
