Level playing field for suppliers of electronic services

In a legislative proposal, the Government presents changes to the VAT Act making suppliers not established in Norway obligated to charge VAT when supplying electronic services to Norwegian consumers (B2C). Today, only suppliers established in Norway must charge VAT when such services are supplied to Norwegian consumers. The proposal will create a level playing field for operators established within and outside Norway, supplying electronic services to Norwegian consumers.

“I am very satisfied that our VAT system will not distinguish between electronic services supplied from Norway and supplied from abroad. The proposed changes will at the same time modernize and update the VAT system, preventing that the increased consumption of electronic supplies from abroad remains untaxed,” says finance minister Sigbjørn Johnsen.

No additional burdens for Norwegian consumers, and simplified registration arrangements for non-established operators

The non-established supplier of electronic services will be obligated to charge VAT on electronic supplies to Norwegian consumers. The proposed amendments will thus not impose any administrative burdens on Norwegian consumers purchasing electronic services.

According to the proposal, suppliers not established in Norway will have to register for VAT in Norway. As an alternative to the use of fiscal representatives, the Ministry of Finance will establish simplified registration and reporting arrangements based on the EU-system (one-stop-scheme). Awaiting the practical and technical establishment of such a simplified registration system, the proposed amendments will come into force 1 July 2011.

 

No new tax

The Government is not proposing any new tax on electronic services. The proposal only makes sure that VAT is charged on the supply of electronic services to Norwegian consumers, regardless of whether the supplier is established in Norway or not.

The proposal will not result in any changes for suppliers already registered in the Norwegian VAT Registry. Suppliers opting to establish in Norway will have to register and charge VAT according the ordinary provisions in the VAT Act.

Businesses and public sector (B2B) already charging VAT on supplies of electronic services and other services capable for delivery from a remote location purchased by the existing reverse charge system, will not meet any changes.

The tables below outline the VAT treatment of electronic services prior to and after the proposed amendments (1 July 2011). Electronic communication services are not included in the table.

 

Table 1 – Supply of electronic services prior to the proposed amendments

	Supplier	Buyer	VAT liable in Norway	Responsible for charging Norwegian VAT
Domestic supply	Business established in Norway	Business established in Norway	Yes	Supplier
	Business established in Norway	Consumer established in Norway	Yes	Supplier
Import	Business established outside Norway	Business established in Norway	Yes	Buyer
	Business established outside Norway	Consumer established in Norway	No	-
Export	Business established in Norway	Business established outside Norway	No	-
	Business established in Norway	Consumer established outside Norway	No	-

 

Table 2 – Supply of electronic services after to the proposed amendments

	Supplier	Buyer	VAT liable in Norway	Responsible for charging Norwegian VAT
Domestic supply	Business established in Norway	Business established in Norway	Yes	Supplier
	Business established in Norway	Consumer established in Norway	Yes	Supplier
Import	Business established outside Norway	Business established in Norway	Yes	Buyer
	Business established outside Norway	Consumer established in Norway	Yes	Supplier
Export	Business established in Norway	Business established outside Norway	No	-
	Business established in Norway	Consumer established outside Norway	No	-

The effects on revenue are uncertain. However, the proposal is estimated to contribute approximately 150 MNOK in annual revenue and booked revenue in 2011 is estimated at 38 MNOK when the changes are introduced from 1 July 2011. Over time the revenue is expected to increase in line with a growing consumption of electronic services.

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