Place of supply
The country whose VAT rules govern a transaction, determined by fixed rules that differ for goods, services, B2B, and B2C.
What it is
Place of supply is the legal concept, defined in Articles 31 to 61 of the EU VAT Directive 2006/112/EC, that decides which country's VAT applies to a given transaction. For B2B services the default place of supply is where the customer is established; for B2C services to EU consumers it is generally where the supplier is established, with exceptions for digital services and distance sales of goods.
Where you meet it
You meet place of supply as the first decision a tax-rules engine makes. In a vatverify decision payload, it appears as "placeOfSupply": "DE" (or another ISO 3166-1 alpha-2 country code), and it drives downstream fields such as the applicable VAT rate, whether reverse charge applies, and whether OSS or IOSS is in scope. On a VAT invoice, place of supply is implied by the tax rate line and the country code on both parties' VAT numbers.
Four headline rules
Most place-of-supply outcomes can be explained by four rules:
- B2B services (general rule): place of supply is the customer's country. The seller invoices net of VAT and the buyer self-accounts under reverse charge.
- B2C services (general rule): place of supply is the supplier's country. The seller charges domestic VAT.
- B2C digital services across the EU: place of supply is the consumer's country. The seller charges destination VAT and reports through OSS.
- Goods (intra-Community): place of supply is where the goods are when the transport begins for B2C distance sales above the OSS threshold; the destination country for B2B intra-Community supplies (combined with reverse charge).
The framework is deceptively simple at this level and extremely complex at the edges. Articles 31 to 61 of the Directive cover dozens of special cases: passenger transport, real estate, restaurant and catering, cultural and educational events, and many others.
Evidence requirements for B2C digital services
For B2C digital services, the consumer's country drives place of supply, so the seller has to evidence that country at the moment of sale. EU rules require the seller to maintain at least two non-contradictory pieces of evidence: typically the billing address, the IP address, and the country of the payment-method issuer. Three matching signals out of three is the strongest defensible position; two-of-three is the regulatory minimum.
A tax-rules engine that emits "placeOfSupply" should also expose the evidence it used to reach that conclusion, so an auditor can reconstruct the decision later.
Common confusions
- Place of supply is not the same as the shipping address. For B2B services it follows the buyer's establishment, even if the deliverable is consumed elsewhere.
- For digital services to EU consumers, the place of supply is the consumer's country, which is why evidence of location (IP address, billing address, bank country) matters.
- Place of supply is what determines the rate; the VAT number validation determines whether reverse charge applies on top of that rate.