Companies of the Member States of the European Union have the right to temporarily provide services in another Member State without establishing a company or subsidiary at the target location. The free movement of services is based on Directive No. 2006/123/EC on services in the internal market.
There are five ways in which cross-border provision of service may take place:
- The service provider establishes a new company in the consumer’s country of location;
- The service provider travels temporarily to the consumer’s country of location;
- The user of the service travels to the service provider’s country of location;
- The service provider and the user are each located in their respective countries and service is provided by way of telecommunications;
- Both the service provider and consumer travel to a third country.
Temporary provision of services means that the service provider is not a stable or consistent participant in the economy of another country. For example, if an Estonian architect designs a house in Germany as part of a particular order, it is considered a temporary provision of services.
The provision of services is not temporary if the service provider participates in the economy of another country consistently or regularly, incl. by advertising their services there and having a local official representation. For example, if the architect mentioned above had a bureau in Germany where they employed local people and served local clients through this bureau, it could no longer be considered cross-border provision of services.
Requirements of the EU Member States in the cross-border provision of services
When providing services in another Member State, general local requirements such as consumer protection, environmental protection, labour laws, and circumstances related to the specifics of the service must be taken into account. Information about requirements in effect in other Member States of the EU can be found via points of single contact.
If your enterprise operates across borders, you need to take into consideration that certain taxes related to transactions and employees must also be paid in another Member State. Taxation laws differ in each country, which is why reviewing local taxation laws is necessary before expanding to a new country.
If you have any issues regarding European Union law when communicating with state authorities or if you require information and advice about EU law, please contact the information and advice service of the European Commission.
Exporting services to countries outside of the European Union
When providing services outside of the European Union, the legislative and administrative norms of foreign countries must be considered, including the restrictions set by those countries on the activities of foreign companies and service providers. These restrictions may include, for example, an establishment obligation or requirements for the citizenship of the service provider, their employees, or their shareholders.
Trade in services with countries outside of the EU is regulated by trade agreements concluded between the EU and third countries or regions as well as the General Agreement on Trade in Services (GATS) of the World Trade Organization (WTO).
The core principle of free trade agreements as well as the GATS is the principle of the most-favoured-nation treatment, pursuant to which, entrepreneurs and service providers of contractual parties must be treated equally to their local equivalents, unless the list of obligations assumed by the countries establishes otherwise.
If you have any questions regarding the trade agreements of the EU or the GATS, please write to [email protected].