Pursuant to the amended Act No 71 of 10 December 2010, it follows from section 3-30 subsections (4) and (5) that value added tax will be payable on services capable of delivery from a remote location in the form of electronic services when such services are supplied to recipients other than businesses and public enterprises (hereinafter referred to as ‘private persons’ or ‘B2C’). The amended VAT Act No 27 of 24 June 2011, provides for a new and simple registration scheme for taxable persons who shall only calculate and pay value added tax on electronic services. The provisions will enter into force on 1 July 2011.
Vendors must therefore decide whether or not they supply ‘electronic services’ when considering whether or not value added tax must be calculated and whether they may choose to use the new, simple registration scheme.
A general definition of ‘electronic services’ is provided in section 1-3 subsection (1) letter (j) of the Act relating to Value Added Tax. Authority to define this term more precisely is granted in section 1-3 subsection (2) letter (e) of the Act relating to Value Added Tax. This option has so far not been exercised. In Proposition 117 L (2010-2011), the Ministry of Finance deems it to be more expedient to define this term in more detail in the form of a statement of interpretation. This statement will describe the basis for determining whether or not it is electronic services that are supplied, and it will provide examples of what must (not) be regarded as electronic services.
By way of introduction, we note that the preparatory works, Proposition 1LS (2010-2011) and Proposition 117 L, state that guidance must be sought in the EU's understanding of the term ‘electronic services’ as set out in the EU directive on value added tax (2006/112/EC) and in the EU regulation on value added tax (Council Implementing Regulation No 282/2011 of 15 March 2011).
At the same time, we would emphasise that Article 7 no 3 of the EU regulation concerning value added tax positively distinguishes between electronic services, on the one hand, and telecommunications and broadcasting services, on the other. With respect to place of supply, the practical outcome must be deemed to be the same for all three types of services when a vendor who is established outside the EU supplies private persons within the EU. While, in the case of electronic services, it is solely the place of residence of the private person that is decisive, the place of supply for telecommunications services and broadcasting services will be the member state in which the private person is resident, if the service is actually used or enjoyed within that member state. The reason for this distinction is that, under current regulations, it is vendors of electronic services that may opt to use the simplified registration scheme in the EU. From 2015, however, similar regulations will apply to all three types of services in the EU. In Proposition 1 LS (2010-2011), the Ministry of Finance assumed that the definition in section 1-3 subsection (1) letter (j) of the Act relating to Value Added Tax applied to electronic services, telecommunications services and broadcasting services and that a distinction similar to that made in the EU was not expedient (see the illustration below, taken from the above-mentioned proposition). In the Directorate of Taxes’ opinion, this means that there is no need to distinguish between these types of services. It also means that, while practice from the EU concerning the services themselves will be of interest, legislation and practice relating to distinguishing between these types of services will be of little interest. We will therefore not go into further detail concerning the term ‘electronic communications services’.
‘Electronic services’ is defined as follows in section 1-3, subsection (1) letter (j) of the Act relating to Value Added Tax:
Electronic services: services capable of delivery from a remote location which are supplied over the internet or other electronic network and which cannot be obtained without the use of information technology, and where delivery of the services is essentially automated.
This definition contains two main components:
- It is a service capable of delivery from a remote location that is actually supplied over the internet or other electronic network and that cannot be obtained without the use of information technology.
- The supply of the service must essentially be automated (involve a minimum of human intervention).
This definition covers services that are supplied via or downloaded from the internet or other electronic networks and where the supply is dependent on information technology to a large extent. This includes digitised products such as books, other types of text, film and music. Such digital products are deemed to be services. The term will also cover content services such as software, games, information etc. Furthermore, the term ‘electronic services’ will cover electronic communications services such as fixed-line telephony, mobile telephony, broadband telephony, internet access etc, and it will include broadcasting services, regardless of whether delivery is made via a conventional radio or television network, via the internet or other network.
A distinction must be drawn, however, in relation to other services capable of delivery from a remote location that can be supplied via networks but that will nonetheless not be deemed to be electronic services. The functional relationship between the two main components of the definition can be illustrated as follows: a consultancy service that is provided in the form of a report and is sent via e-mail will be a service capable of delivery from a remote location that is supplied via the internet or other electronic network. Since such a report can be delivered without the use of information technology and is not essentially automated, it will nonetheless not be deemed to be an ‘electronic service’.
Correspondingly, an educational service that is obtained via the internet in the form of a teacher providing tuition by means of video via the internet will be a service capable of delivery from a remote location that is delivered via the internet and that cannot be provided without the use of information technology. The service will nonetheless not be regarded as an ‘electronic service’ because it cannot be regarded as essentially automated.
It can also be specified that goods or other services shall not be deemed to be electronic services even though information technology is involved, provided that the other conditions are not fulfilled. Examples of this are goods that are ordered and paid for via the internet, CDs, flash drives and other physical storage media, printed material that is also available in electronic versions, offline service support for hardware, and switchboard services.
Based on Annex II of the EU Directive on the Common System of Value Added Tax and Annex I of the Council Implementing Regulation concerning value added tax, we have prepared a list of examples of electronic services. This list is not exhaustive. It is emphasised that a service that comes under the definition of ‘electronic services’ may nonetheless, depending on the circumstances, fall outside the scope of the Act relating to Value Added Tax because the service is exempt when it is supplied in Norway, cf. the Act relating to Value Added Tax, section 3-30 subsection (4). This may be relevant in the case of services that, for example, fall under the exemption for lottery services, cf. the Act relating to Value Added Tax, section 3-14.
Category of ‘electronic service’
|Supply and hosting of websites, remote maintenance of software and hardware
- Website hosting and web page hosting
- Automated online remote maintenance of software
- Remote administration of systems
- Online data warehouses
- Online supply of storage space
Software and updates of software
- Access to or downloading of software (including procurement/accountancy software and anti-virus software) and updates
- Downloading of banner blockers
- Downloading of drivers
- Automated online installation of filters on websites
- Automated online installation of firewalls
Supply of images, text and information, and access to databases
- Access to or downloading of desktop themes
- Access to or downloading of images or screensavers
- Digitised content of books and other electronic publications
- Subscriptions to online newspapers and journals
- Weblogs and website statistics
- Online news, traffic information and weather reports
- Online information which is automatically generated by software as specified by users, such as continually updated stock market information.
- Advertising space, including banner ads
- Use of search engines and internet directories
Supply of music, films, games, broadcasts and political, cultural, artistic, sports, scientific and entertainment occurrences and events
- Access to or downloading of music on computers and mobile phones
- Access to or downloading of ringtones, jingles, excerpts or other sounds
- Access to or downloading of films
- Downloading of games on computers and mobile phones
- Access to online games that are dependent on the internet or other similar electronic networks, where players are geographically remote from one another.
- Internet-based broadcasts of incidents and events, such as online TV and online radio. This applies even if broadcasting occurs simultaneously over conventional radio or TV networks (this deviates from the EU definition, and the justification is that electronic communications services are also covered by the term ‘electronic services’); cf. comment above.
|Supply of distance teaching
- Automated distance teaching that is dependent on the internet or similar electronic network and that only requires limited or no human intervention, including virtual classrooms. A service where the internet or similar network that is essentially used as a means of communication between teacher and pupil is not an electronic service.
- Course material that is answered by pupils online and that is marked automatically without human intervention.
- Online auctions, marketplaces and shopping portals that are based on automated databases and data input from customers and that require limited or no human intervention.