Vertex CyberTax News

Fiber Optics – Taxed where Traversed

The European Court of Justice (ECJ) has ruled that the supply and installation of fiber optic cable is a supply of goods, and not a supply of services, subject to tax where the cable is installed.

The Appellant in the case engaged in the supply and installation of fiber optic cables run between Sweden and other EU Member States. The cable was buried in the ground on the Swedish mainland and then in the seabed of Sweden’s territorial waters, in international waters, in the territorial waters of another Member State and finally in the mainland of the other Member State. The cost of the cable accounted for as much as 80 to 85% of the total cost and ownership of the cable was transferred to the purchaser after installation took place.

The Swedish tax authorities had ruled that the supply was a service that took place in Sweden. The Appellant appealed to the Supreme Administrative Court who referred the matter to the ECJ.

The ECJ ruled that the supply was a supply of goods and that the supply must be taxed in Sweden and the other Member State pro rata according to the length of cable installed in the territory of each. The cable that was installed outside of the EU is not subject to VAT.

Sign up here for the CyberTax News and receive monthly news updates from Vertex - featuring the latest news and research to hit the Tax Cybrary.