The VAT rules on the place of supply of services – which includes the transfer and licensing of intellectual property – are changing from January 1st, 2010. The practical effect of this is relatively limited for intellectual property, as the rules are changing to make the VAT implications for other services more closely aligned to the rules that already apply to intellectual property. The principal changes are the legislation references.
The basic rule for supplies to businesses is that the supply takes place where the customer belongs: therefore, for a UK licensor/transferor, no VAT needs to be charged as an EU customer will self-assess for local VAT on the licence/transfer and a licence/transfer to a non-EU business will be outside the scope of VAT. The practical effect hasn’t changed, but this is now the general rule (s7A VAT Act 1994) rather than a special rule under Schedule 5.
The basic rule for licences/transfer of intellectual property to EU consumers is that the supply takes place where the licensor/transferor belongs: therefore, for a UK licensor/transferor, the VAT rate that needs to be applied is the UK VAT rate. Again, the practical effect hasn’t changed, but this is now the general rule (s7A VAT Act 1994) rather than a special rule under Schedule 5.
The basic rule for licences/transfer of intellectual property to consumers outside the EU is that the supply take place where the recipient belongs: this means that the supply is outside the scope of VAT and so no VAT should be charged. Again, this hasn’t changed but the rules are now in Schedule 4A of the VAT Act 1994.
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