General VAT liability introduced on cross-border B2C supplies of non-electronic services
Effective 1 January 2023, Norway has extended its VAT rules to apply to all “remotely deliverable services” from abroad to consumers in the Norwegian VAT area in order to level the playing field between Norwegian and foreign providers of such services. Previously, only remotely deliverable electronic services to consumers fell within the scope of VAT. The changes are in line with the VAT principles in the OECD guidelines and the main principles for the place of supply of B2C services in the EU VAT Directive.
Remotely deliverable services are services that cannot be, or are difficult to, link to a specific physical location (e.g., consulting services, sales of streaming services, etc.).
Overview of the 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 (B2B supplies), provided the services are subject to VAT in Norway. VAT on these supplies is collected through the reverse charge mechanism where the recipient is responsible for calculating and paying the VAT due.
In the case of B2C supplies to Norway, the foreign supplier must calculate and collect VAT and register for VAT purposes using the simplified registration and reporting scheme (VOEC or VAT on E-commerce).
About the changes
Suppliers located outside the Norwegian VAT area making supplies to consumers in Norway now must calculate and charge VAT on all remotely deliverable services subject to VAT, not just electronic services.
Examples of services that are subject to Norwegian VAT are those 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 that does not qualify as an electronically deliverable service. A service would typically be considered to be delivered electronically when the supply is automated to a large degree. Services exempt from VAT include remotely deliverable education services, financial services and health services.
Consumers for these purposes include private persons, as well as customers that are not considered a business, such as holding companies and voluntary organisations. However, to address the challenges that can arise in determining the status of a customer (for example, in the case of sole proprietorships, which can act both as a consumer and a business), there is proposal to specify in the regulation to the VAT Act when foreign suppliers can presume that a recipient is not a business or public entity, but no specification has been released to date.
Registration and reporting of VAT
Suppliers subject to the changes are able to use the VOEC simplified registration and reporting scheme even if the supplier also provides remotely deliverable services to recipients covered by the reverse charge rules. However, suppliers cannot use the VOEC scheme if their turnover is deemed to be so closely connected to Norway that it is considered domestic turnover; in that case, the general VAT registration and reporting scheme applies.
Suppliers using the simplified registration scheme must keep track of covered transactions so that the Norwegian tax authorities can determine whether the VAT calculation is correct. The supplier should at least have information on 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 treatment of the import and export of services, the rules governing VAT on the export of services also have been revised. Until 2023, the supplier had to determine whether a recipient outside the Norwegian VAT area was a business or public entity or a consumer. The supply of remotely deliverable services to businesses and public entities was exempt when the recipient was located abroad regardless of whether the services were used within the Norwegian VAT area. Services to private consumers would only be exempt if the services were entirely for use outside the Norwegian VAT area.
As of 2023, no such distinction is necessary for B2B or B2C services as the supply will be zero rated in general when the recipient is located abroad. For remotely deliverable services to consumers, it is no longer be necessary to determine whether the service is entirely for use outside the VAT area.