With effect from 1 January 2023, the Norwegian Ministry of Finance proposes to introduce a VAT obligation on all remotely deliverable services from abroad to consumers in the Norwegian VAT area.
The Ministry suggests that when the customer is a consumer (B2C-sales), the supplier located outside the VAT area is responsible for charging and collecting VAT on all remotely deliverable service. The proposal will be in line with the VAT principles in the OECD guidelines and the main principles for place of supply of services to consumers (B2C) in the EU VAT Directive 2006/112.
Current rules
According to the Norwegian VAT Act, businesses and public authorities located in Norway must pay VAT on all purchases of remotely deliverable services from businesses located abroad. Consumers located in Norway must only pay VAT on such purchases if the service is electronic.
For the first-mentioned group of recipients, VAT is collected through the rules on reverse VAT liability where the recipient is responsible for calculating and paying the VAT. For the latter group, VAT is calculated and paid by the supplier through the simplified registration and reporting scheme called VOEC (VAT on E-Commerce).
About the proposal
The proposal will entail a responsibility to calculate and charge VAT on all remotely deliverable services subject to VAT, not just electronic services, for suppliers located outside the Norwegian VAT area to consumers located in Norway.
Consumers will include private persons as well as customers not considered a business, such as holding companies and voluntary organizations. Further, sole proprietorships can act both as a consumer and a business, making it challenging for the supplier to whom the services are provided.
On this background, it is proposed to specify in the Regulation to the VAT Act when foreign suppliers can assume the recipient is not a business or a public entity.
Examples of services that will be subject to Norwegian VAT include services that can be delivered online or by other remote means such as consulting and advisory services, legal services outside court proceedings, and any electronic service not qualifying as an electronically deliverable service. Services exempt from VAT will include remotely deliverable education services, financial services and health services.
Registration and reporting of VAT
Suppliers covered by the proposal will be able to use the simplified registration and reporting scheme VOEC (VAT on E-commerce). This applies even if the supplier also supplies remotely deliverable services to recipients who are covered by the rules on reverse VAT calculation. However, suppliers will not be able to use the scheme if the turnover's connection to Norway is so strong that it is considered domestic turnover. In that case, the general registration and reporting scheme through registration in the Value Added Tax Register shall apply.
Providers in the simplified registration scheme must keep an overview of transactions covered by the VOEC scheme. Such an overview must be detailed enough for the Tax Agency to assess whether the VAT calculation is correct. The overview must at least contain information about the customer's name and address, delivery date, currency, the consideration including VAT and the amount of VAT.
Export of services
To ensure symmetry in the VAT handling of import and export of services, it is proposed to change the current legislation on VAT on export of services. Under the current rules, the supplier will need to assess whether the recipient outside the Norwegian VAT area is a business or public entity, or a consumer.
For businesses and public entities, the supply of remotely deliverable services is exempt when the recipient is located abroad regardless of whether or not the services are used inside the VAT area. For consumers, the services are only exempt if they are entirely for use outside the VAT area.
The proposed changes means that the sale of remotely deliverable services will be exempt from VAT if the recipient is resident outside the VAT area. For remotely deliverable services to consumers, it will no longer be necessary to assess whether the service is entirely for use outside
the VAT area.
How we can assist
BDO Advokater AS has extensive experience with reporting obligations for foreign businesses under the VOEC scheme.
Please do not hesitate to contact us if you would like to discuss what effects the proposed changes may have on your business.