Greenhouse gases

Greenhouse gases

Customs have announced their policy in determining the place of supply of emissions allowances when traded across borders. This follows extensive discussions in Europe on the European Union Emissions Trading Scheme and ensures consistency with other Member States, removing the possibility for double or no taxation.

The trading scheme sets out the rules for a scheme in greenhouse gas emission allowance trading within the Community. It is likely to come into force on 1 January 2005. However, in advance of that date all Member States have agreed the rules for determining the place of supply of those allowances for VAT purposes. It has been agreed that for cross-border supplies of allowances, the place of supply should be the place where the customer belongs. This approach aligns place of supply treatment across the EU and therefore avoids instances of double taxation.

The place of supply of brokers' services needs to be determined separately. As the place of supply for cross-border transactions in allowances is where they are received, the broker's supply will take place where that broker's customer belongs, regardless of where the actual emissions allowances are sold. According to the normal rules, a broker is regarded as such when sufficient intermediation is performed.

Where the service is one of mere introduction, the supply will be seen in accordance with the basic rule, i.e. where the introducer belongs.

This policy will be implemented from 26 October 2004.

(Customs Business Brief 28/2004 dated 26 October 2004.)

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