Boston University School of Law

Use and Enjoyment of Intangible Services:
The German, Austrian, Danish and Estonian VAT Derogations

Richard Thompson Ainsworth

54 Tax Notes International 273 (April 27, 2009)
Boston University School of Law Working Paper 09-11


 When the Czech Republic elected (effective January 1, 2009) to derogate from the standard rules for determining the place of supply for intangible services, pursuant to Article 58 of the Recast VAT Directive (RVD), it was following the lead of ten other Member States.  This paper considers four of those other jurisdictions – Germany, Austria, Estonia, and Denmark – and compares their derogations with that of the Czech Republic. 

In each instance a use and enjoyment standard determines the place of supply for certain intangible services. The affected transactions are (potentially) wide ranging.  In each instance non-EU countries are on one end of the impacted transaction.  As a result, these rules can easily become a trap for unwary businesses (particularly non-EU businesses) because the traditional proxy-based rules (RVD Articles 43 and 56(1)) are being selectively overturned.

Each Member State that has taken this option has (in some manner) limited the impact of their derogation. This article and the article which preceded it have considered six of the twenty-seven EU countries that have derogated from the normal rules. 

The results have ranged from near full adoption of the use and enjoyment criteria in Denmark to indirect adoption of it in Estonia.  The German and Austrian approaches seemed to be the most cautious, and the most targeted.  With rules issued in ministerial decrees rather than statute, it is difficult to escape the impression that Germany and Austria see the use and enjoyment criterion on RVD 58 as a tool to correct flaws in the system.  PEs are critical to both the Czech Republic and Estonian applications of use and enjoyment, and a similar approach guides the UK analysis although in this case it is subsumed in the in the meaning of a “belonging.” 

One might have thought that use and enjoyment would have received more attention than it did in the 2008 VAT package.  However, the concern there was primarily with refining the use of proxies, not limiting or controlling the use and enjoyment criterion for determining the place of supply for intangible services.

Keywords: Austria, Germany, Estonia, Denmark, VAT, Use and Enjoyment, Place of Supply, Proxy

JEL Classifications: H00, H20, H70, K34, O23, O33


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Richard Thompson Ainsworth Contact Information
LL.M. Tax Program
Boston University School of Law
765 Commonwealth Ave
Boston, MA 02215

Phone: (781) 773-1052

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