Place of Effective Use and Enjoyment of Services – EU History Repeats Itself

Under the place-of-supply rules for services that came into force in the European Union on 1 January 2010, Member States have broader powers to unilaterally deviate from the standard place-of-supply rules laid down by the VAT Directive and to tax services at the place where they are effectively used and enjoyed. By adopting those new rules, the EU legislature has taken a step back in an evolutionary process of more than 40 years and ignored the fact that international experience shows that the place of real consumption (or of effective use and enjoyment) is not an efficient criterion for taxing services. In this article, the author discusses the unnecessary complexity and uncertainty that the EU legislature has created.