The incoming EU VAT Package, which affect changes to rules on the taxation of cross-border services, is set to pose an administrative burden for business, the Chartered Institute of Taxation has warned. According to the new rules which come into effect on January 1, virtually all services supplied to a business in another EU member state will be regarded as having been supplied in the place where the customer (the business receiving the service) is established. The new package is being introduced in a bid to address the internationalisation of service provision. At present, some services (such as management services) are treated, for tax purposes, as being supplied where the business supplying them is based. The reforms are designed to produce a more level playing field between service providers, and to prevent them reducing their VAT bill by locating outside the EU, or in the EU member states with the lowest VAT rates. Douglas Gordon, Chairman of the CIOT's VAT and Indirect Taxes Sub-Committee, said that the introduction of a general rule that the place of supply of services is where consumption takes place is sensible. 'In the process we have lost a number of areas of uncertainty, which will deliver significant benefits. However, I fear that the changes will add to the administrative burden on many businesses. This is because the shift in the general rule means that national governments need statistical data on cross-border transactions in order to police them. The existing 'Intrastat' system is therefore being extended from goods to services, with a consequential increase in the administrative burden, and many businesses being brought into the system for the first time. 'Unfortunately, the system will continue to have its complexities. The EU needs to be ready to step in and resolve problems that come about where there are differences in views between member states. For example, where a UK company has a presence in, say, Germany and makes a supply to a German customer, what level of involvement does the UK company's German presence require before the supply is treated as having been made by that entity? It is important that businesses are not caught in the middle,' said Gordon.