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Place of Supply
The tax jurisdiction where a supply of goods or services is deemed to take place for VAT purposes, determining which country's VAT rules apply to the transaction.
Place of supply rules determine which country has taxing rights over a transaction. Getting the place of supply wrong means applying the wrong country's VAT rates and filing in the wrong jurisdiction — a compliance failure that can result in back-taxes and penalties.
Place of Supply for Digital Services
For digital services (including SaaS, APIs, streaming, and software), the place of supply is always where the customer is located. This applies regardless of where the supplier is based. A German company selling SaaS to a French consumer must apply French TVA at 20%, not German MwSt. at 19%.
| Customer Type | Customer Location | Place of Supply | VAT Rules Applied |
|---|---|---|---|
| B2C consumer | EU country | Customer's country | Customer's country VAT rate |
| B2B business (verified VAT number) | EU country | Customer's country | Reverse charge — buyer accounts for VAT |
| Any | Outside EU | Outside EU | No EU VAT — out of scope |
Why This Matters for Developers
Your billing system must determine the customer's location before computing tax. Using the billing address country as a proxy is standard, but for compliance you should also consider IP geolocation as a secondary signal for B2C customers. For B2B, the validated VAT number determines jurisdiction.
Tip
Store both the billing country and the VAT validation result on every transaction. This gives you the evidence needed to justify your tax treatment if audited — a billing address alone is insufficient for reverse charge.
Frequently asked questions
What is the place of supply for SaaS?
For SaaS and all digital services, the place of supply is where the customer is located, regardless of where your company is based. This is defined in EU Directive 2006/112/EC, Article 58.
Does place of supply change for B2B vs B2C?
The place of supply for digital services is the customer's location in both cases, but the tax treatment differs. B2B sales to verified businesses use reverse charge (no VAT on your invoice). B2C sales require you to charge VAT at the customer's country rate.
What if a customer claims to be in a low-tax country but their IP shows otherwise?
You must make a reasonable determination based on the evidence available. Using two non-contradictory pieces of evidence (billing address + payment country) is sufficient under EU rules. Document your determination policy and apply it consistently.
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Related resources
Related terms
Standard VAT Rate
The default VAT rate applied to most goods and services in a country, ranging from 17% (Luxembourg) to 27% (Hungary) across EU member states.
VAT Exemption
A VAT exemption means a transaction is not subject to VAT, either without the right to deduct input VAT (exempt without credit) or with full input VAT recovery (zero-rated).
VAT Invoice Requirements
The mandatory information that must appear on a VAT invoice under EU Directive 2006/112/EC, including supplier and customer details, VAT number, tax amount, and tax rate.