Place of Supply Exceptions That Catch Service Businesses Off Guard

Article 44 establishes the general B2B rule: the place of supply of services to a taxable person is the place where the customer is established. Article 45 sets the general B2C rule: the place of supply is where the supplier is established. These two rules handle the vast majority of service transactions for consultants, designers, developers, and professional service providers.

But the VAT Directive contains a series of exceptions in Articles 46 through 59a that override the general rules for specific categories of services. When an exception applies, it takes priority — regardless of what the general rule would dictate.

The exceptions exist because certain services have a strong physical or geographic connection to a specific location. A service connected to a building in Germany should be taxed in Germany, regardless of where the supplier or customer is established. An event in Paris should generate French VAT, not VAT in the attendee's home country. The exceptions ensure VAT is collected where consumption actually occurs.

Article 47 is the exception most likely to affect service businesses by surprise. It provides that services connected with immovable property are taxed where the property is located. This overrides both the B2B and B2C general rules.

The scope is broad. Article 47 explicitly mentions "the services of experts and estate agents, the provision of accommodation in the hotel sector or in sectors with a similar function, such as holiday camps or sites developed for use as camping sites, the granting of rights to use immovable property and services for the preparation and co-ordination of construction work, such as the services of architects and of firms providing on-site supervision."

Article 13b of Implementing Regulation 282/2011 defines "immovable property" to include: any specific part of the earth (on or below its surface) over which title and possession can be created, any building or construction fixed to or in the ground above or below sea level which cannot be easily dismantled or moved, any item that has been installed and forms an integral part of a building or construction without which the building or construction would be incomplete (doors, windows, roofs, staircases, lifts), and any item of equipment or machine permanently installed in a building that cannot be moved without destroying or altering the building or construction.

Not every service that mentions a property falls under Article 47. Article 31a(1) of the Implementing Regulation provides the test: the service must have a "sufficiently direct connection" with the immovable property. This connection exists where the service is derived from the property and the property is a constituent element of the service — central to and essential for it — or where the service is provided to, or directed towards, the property, having as their object the legal or physical alteration of that property.

Article 31a(2) provides a positive list of services that are considered to have a sufficiently direct connection: drawing up of plans for a building designated for a particular plot of land, on-site supervision or security services, construction and demolition of a building, maintenance repair and renovation of a building, installation of machines or equipment that become an integral part of the property, property management services, real estate agency services relating to a specific property, and legal services relating to the transfer of a property title.

Article 31a(3) provides a negative list of services that do not have a sufficiently direct connection: drawing up of plans for a building that is not designated for a particular plot of land, storage of goods in the property without the customer having exclusive use of a defined area, advertising even if it involves the use of immovable property, management of a property investment portfolio (as opposed to management of the physical property), and legal services connected to contracts where such services are not specific to a transfer of a title on an immovable property.

The CJEU has applied this distinction in several cases. In Heger (C-166/05), the Court held that the grant of fishing rights in a specific section of a river was a service connected with immovable property — the immovable property was a constituent element of the service, central to and essential for it. In RR Donnelley (C-155/12), the Court set two cumulative conditions for warehousing to qualify as a service connected with immovable property: (1) storage must be the principal service of the arrangement, and (2) the customer must have the right to use all or part of expressly specific immovable property.

Article 53 covers B2B admission to events: the place of supply of services in respect of admission to cultural, artistic, sporting, scientific, educational, entertainment, or similar events (including fairs and exhibitions), and ancillary services related to admission, shall be the place where the event actually takes place.

This means if you sell a conference ticket to a business in Spain for a conference held in Berlin, the place of supply is Germany. German VAT applies, not Spanish. You may need to register for VAT in Germany or use the reverse charge mechanism (depending on the specific arrangement).

Article 54 covers B2C events and activities more broadly: for non-taxable persons, the place of supply of services relating to cultural, artistic, sporting, scientific, educational, entertainment, and similar activities is where the activities physically take place.

Ancillary services deserve careful attention. Article 53 covers both admission services and ancillary services related to admission — both are taxed where the event physically takes place for B2B transactions. However, event-related services that go beyond admission and its ancillary services — such as general event sponsorship, event organisation consulting, or speaker fees unrelated to admission — fall outside Article 53 and follow the general Article 44 rule (where the customer is established). The distinction between admission-related services and broader event services matters significantly for event organisers and consultants who work around events.

Directive 2022/542 introduced an important change effective from 1 January 2025. Article 54(1) was amended to address activities streamed or otherwise made virtually available to non-taxable persons.

Where an event is streamed or made virtually available to a B2C customer, the place of supply is now where the customer is established, has their permanent address, or usually resides. Before 2025, the VAT treatment of virtual access to events was legally uncertain — the CJEU held in Westside Unicat (C-532/22) that a studio-produced content service supplied via a platform did not fall under the physical-event rule, as the service was not made available at a venue to which admission was granted. Directive 2022/542 resolved this from 1 January 2025 by explicitly addressing virtual access.

This is a significant change for businesses selling virtual access to conferences, concerts, workshops, or educational events to consumers. The tax follows the consumer, not the venue.

Article 55 provides that restaurant and catering services are taxed where the services are physically carried out. This applies to both B2B and B2C supplies with no distinction.

For most consultants and freelancers, this exception arises when organising client events that include catering. If you host a workshop in Milan and include catering, the catering service is taxed in Italy regardless of where you or your client are established. This may mean the catering component of your service is taxed differently from the consulting component.

There is a specific sub-rule for catering services supplied on board ships, aircraft, or trains during intra-EU passenger transport: Article 57 provides that these are taxed at the point of departure of the passenger transport operation.

Article 56 distinguishes between short-term and long-term hire, with different place of supply rules for each:

Short-term hire (continuous possession or use for up to 30 days, or 90 days for vessels): the place of supply is where the means of transport is put at the disposal of the customer. If you rent a car at Amsterdam Schiphol airport, the place of supply is the Netherlands, regardless of where you subsequently drive.

Long-term hire to non-taxable persons (B2C, exceeding the short-term limits): the place of supply is where the customer is established, has their permanent address, or usually resides. This follows the consumer, not the vehicle.

Long-term hire to taxable persons (B2B): follows the general Article 44 rule — where the customer is established. The transport hire exception does not override the B2B general rule for long-term hire.

For most service businesses, this exception is relevant when renting vehicles or equipment for projects. A car rented in France for client work in France carries French VAT, even if your business and client are both established elsewhere.

Article 58 provides that TBE (telecommunications, broadcasting, and electronically supplied) services supplied to non-taxable persons are taxed where the customer is established, has their permanent address, or usually resides. This overrides the B2C general rule under Article 45 (which would otherwise tax at the supplier's location).

"Electronically supplied services" has a specific definition under Article 7 of Implementing Regulation 282/2011: services delivered over the internet or an electronic network that are essentially automated, involving minimal human intervention, and impossible to ensure in the absence of information technology. Examples include software downloads, e-books, music streaming, online gaming, SaaS platforms, and web hosting.

The €10,000 threshold: Under Article 59c, an EU-based supplier whose combined total of cross-border B2C TBE supplies and intra-Community distance sales of goods to other Member States does not exceed €10,000 per calendar year (and did not exceed it in the preceding year) may apply their home country's VAT rate instead of the destination country rate. Above this threshold, the supplier must charge the destination country rate, typically using the One Stop Shop (OSS) scheme.

Article 59a gives Member States an optional power to override certain place of supply rules based on where a service is effectively used and enjoyed. A Member State can shift taxation towards or away from its territory to reflect actual consumption.

The override works in two directions:

Inward shift: A Member State may treat a service that would otherwise be placed outside the EU as supplied within its territory, if the effective use and enjoyment takes place there. This prevents untaxed consumption within the EU.

Outward shift: A Member State may treat a service that would be placed within its territory as supplied outside the EU, if the effective use and enjoyment takes place outside the EU. This prevents double taxation on services consumed outside Europe.

Not all Member States implement Article 59a, and those that do apply it selectively. The provision covers services under Articles 44, 45, 54(1) second subparagraph, 56, 58, and 59 — a broad range of service categories, though not all (notably excluding immovable property under Article 47, B2B admission under Article 53, and restaurant services under Article 55). In practice, examples of services for which Member States exercise this override include telecommunications, broadcasting, and the hiring of means of transport. For standard consulting and professional services, the use and enjoyment override rarely applies — but check the specific rules of the relevant Member State.

When determining where a service is taxed, follow this decision order:

Looking ahead: ViDA platform rules. The VAT in the Digital Age (ViDA) package introduces a new Article 28a, which creates deemed supplier provisions for platforms facilitating short-term accommodation rental and passenger transport services by road. The implementation window for these provisions is at earliest July 2028 and at latest January 2030. Platform operators will be treated as having received and supplied the underlying service. A corresponding Article 46a introduces a new place of supply rule for these platform-facilitated transactions.