VAT registration for foreign service providers of electronic services
VAT registration for foreign service providers of electronic services
On 24 February 2011 the Ministry of Finance submitted for a public hearing (see link) a proposal for amendment of the Norwegian VAT Act, based on amendment of the act of 10 December 2010 whereby the Parliament decided that a VAT at the standard rate of 25% should apply to provision of electronic services from abroad to Norwegian consumers, equally to provision of such services by Norwegian companies. Electronic services to the industry and electronic communication to the industry and to private individuals are already subject to VAT.
For businesses seated outside of Norway providing services to Norwegian consumers, e.g. through the Internet, the new regulation implies a new requirement to register with Norwegian tax authorities when sales to Norway exceed NOK 50,000, either through registration of a representative in the Norwegian VAT Register pursuant to the general regulation or through a simplified registration procedure. The Bill proposes that provider of such services will be liable for computation and payment of Norwegian VAT.
The deadline for comments to the hearing expires 24 March 2011. The new regulations on VAT on electronic services from abroad to private individuals in Norway will enter into force 1 July 2011.
"Electronic services"
The term “Electronic services” is defined in the VAT Act section 1-3 first paragraph j): Electronic services mean remote services provided through the Internet or other electronic networks; which cannot be acquired without information technology, and where the provision of the services is mainly automated. The term “electronic services” in the VAT Act should be interpreted in line with the EU VAT Directive.
Liability for computation and payment of VAT
The liability for calculation and payment of VAT lies with the provider of services to Norwegian private individuals, except for services to recipients who are liable for VAT pursuant to the regulations on reversed tax liability for remote services. For services to the industry and public activities the recipient shall compute and pay VAT.
Registration requirements
Providers of electronic services who will not establish a permanent establishment in Norway may register through a representative pursuant to the VAT Act section 2-1 sixth paragraph, or they may choose a simplified way of registration. The obligation does not apply before sales to Norway exceeds a limit of NOK 50,000.
Simplified registration and reporting system
The Ministry proposes to establishing a separate register for foreign providers of electronic services providing services to private individuals in Norway. The establishment of this register implies that providers choosing this arrangement shall not be registered in the VAT Register.
Registration
The simplified registration system will be open for all providers of electronic services to private individuals. The Ministry also proposes that foreign providers that provide electronic services through electronic communication services should be able to use the simplified registration system. This group of providers is today registered through a representative in the VAT Register.
Simplified registration produceers
As mentioned the Ministry proposes an establishment of a new register for foreign providers providing electronic services to private individuals in Norway. Providers using the simplified procedure will therefore not have to register in the VAT Register, nor is registration in the Central Coordinating Register for Legal Entities required. Furthermore the Ministry proposes that all communication between provider and the tax authorities shall be mainly electronic. Through a separate web solution the providers will be able to acquire information on relevant regulations and apply for registration.
In other words, providers of electronic services not having a permanent establishment must make a choice when their services to private individuals in Norway exceed NOK 50,000. Either they must apply for registration in the VAT Register through a representative according to the general rules, or they may choose the simplified procedure. In the latter case, the provider must submit an electronic application to the relevant tax office as soon as the requirements apply.
According to the proposal the application shall contain name of provider, postal address, electronic addresses, including web address, the provider’s tax identity number in the country of residence and a statement that the providers is not subject to VAT in Norway. The tax office will then allot to the service provider an identification number in the special register and notify the provider electronically of the registration.
VAT return form
Under the simplified arrangement the VAT Return form shall be submitted on a quarterly basis. The filing date shall be 20 days after expiry of the term. The VAT return form shall be submitted electronically through a web solution to be prepared.
Payment
VAT will only be payable through bank services. Cash payment is not possible.
Simplified documentation requirements
Pursuant to the EU VAT Directive the most important means of control is that providers shall keep a survey of transactions comprised the VAT liability. The Ministry proposes that this survey shall be electronically available for the tax office three weeks at the latest upon request from the tax office. A transaction survey would normally refer to a bill of sale. However as the simplified arrangement will not imply a duty to issue a bill of sale, reference to other sources showing the transaction, including electronic documents, would be adequate, such as an electronic log. The survey also shall state (i) the date of delivery (ii) the name and address of the customer, (iii) the currency used for the purchase of the services, (iv) the consideration, including VAT, quoted in Norwegian Kroner and finally (v) the VAT to be paid. It is not a requirement that the service is specified further.
Refund of ingoing VAT
The Ministry proposes that providers using the simplified arrangement shall not be entitled to deduct ingoing VAT. They may, however, apply for a refund pursuant to the present regulations applicable for foreign businesses in Norway.
This article is written by partner Trond Erik Andersen who has specialized in tax and VAT law and is working in SIMONSEN’s Corporate department.