If a supplier of services and the recipient are located in two different countries it is necessary to determine the â€œplace of supplyâ€ for VAT purposesIn the case of HMRC vs Finmeccania Group Services SpA (â€œFGSâ€), the taxpayer was a group service company supplying security services to sister Italian companies. FGS is also established in Italy and sought the repayment of UK VAT charged to them in relation to the provision of enclosures at Farnborough International Airshow, the use of which was part of their marketing strategy. HMRC's view was that the tax refund should not be available as their interpretation was that FGS were making a supply in the UK, something FSG themselves contended. These services include the arrangement of the enclosure on behalf of the members of the Finmeccania Group, tailored to their specifications.In this instance, the Court ruled that the general rule for determining the place of supply was applicable to the services provided by FGS. The result of the general rule is that the place of supply (and therefore the VAT treatment) is determined with reference to the country where the recipient of the service is established which, for FGS, was Italy. Due to Italy being treated as the place of supply, FGS were judged to be entitled to the refund as they did not make any taxable supplies in the UK meaning the Upper Tribunal ruled in the respondents favour.Although, in this instance, the basic rule is appropriate there are many exceptions and overrides that determine where a supply of services has taken place. If you supply services to customers in different countries, it is important to know where those services are liable to VAT. If you are involved in a transaction of this nature as the supplier or the customer and wish to obtain clarity in relation to your VAT position, please don't hesitate to speak to one of our expert VAT consultants on our free helpline.
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