The International VAT/GST Guidelines1 (“the Guidelines”) set forth internationally agreed principles and standards for the value added tax (VAT) treatment of the most common types of international transactions, with a particular focus on trade in services and intangibles. Their aim is to minimise inconsistencies in the application of VAT in a cross-border context with a view to reducing uncertainty and risks of double taxation and unintended non-taxation in international trade. They also include the recommended principles and mechanisms to address the challenges for the collection of VAT on cross-border sales of digital products that had been identified in the context of the OECD/G20 Project on Base and Erosion and Profit Shifting (the BEPS Project).2 VAT is a major source of revenue for governments around the world. Some 165 countries operated a VAT at the time of completion of these Guidelines, more than twice as many as 25 years before. This global spread of the VAT coincided with the rapid expansion of the international trade in goods and services in an increasingly globalised economy. Most international trade is now subject to VAT and the interaction of national VAT regimes can potentially have a major impact in either facilitating or distorting trade. The absence of an internationally agreed framework for the application of VAT to cross-border trade created growing risks of under-taxation and loss of revenue for governments, and of trade distortion due to double taxation. This had become especially problematic with respect to international trade in services and intangibles, which has shown a particularly strong growth notably as a consequence of the expansion of the digital economy.

Against this background, the OECD Committee on Fiscal Affairs (CFA) launched the project to develop the International VAT/GST Guidelines in 2006, recognising that jurisdictions would benefit from an internationally agreed standard that contributes towards ensuring that VAT systems interact consistently so that they facilitate rather than distort international trade. These Guidelines were intended to set the standard for countries when designing and administering their domestic rules.

The International VAT/GST Guidelines build on international dialogue among OECD Members and partner countries and other relevant stakeholders, including academia and private institutions. Recognising the growing need to further strengthen the involvement of partner economies in the development of the Guidelines, the CFA created the Global Forum on VAT in 2012 as a platform for a structured VAT policy dialogue with partner countries and other relevant stakeholders. The meetings of this Global Forum provided the opportunity for countries worldwide, particularly developing economies, to contribute actively to the development of the Guidelines. At its first meeting on 7-8 November 2012, this Global Forum agreed that the Guidelines should be the basis for the much needed global standard on the application of VAT to the international trade in services and intangibles and that the Global Forum’s key objective would be to build the widest possible international consensus on these Guidelines with a view to achieving their endorsement as the international standard

The Guidelines were completed in 2015. In November 2015, at the third meeting of the Global Forum on VAT, the high-level officials of the participating 104 jurisdictions and international organisations endorsed the Guidelines as a global standard for the VAT treatment of international trade in services and intangibles to serve as a reference point for designing and implementing legislation. All Global Forum participants welcomed the active involvement of an increasing number of countries worldwide and of the global business community in shaping the outcomes of this work. They also welcomed the prospect of the incorporation of these Guidelines into an OECD Council Recommendation that would be open to adherence by all interested partner economies.

The Guidelines were incorporated in the Recommendation on the Application of Value Added Tax/Goods and Services Tax to the International Trade in Services and Intangibles, which was adopted by the Council of the OECD on 27 September 2016 (included in the Appendix of this publication). This Recommendation is the first OECD legal instrument in the area of VAT and the first internationally agreed framework for the application of VAT to cross-border trade which aspires to a global coverage.

This Recommendation is addressed to Members and to non-Members having adhered to it (“Adherents”). It represents these jurisdictions’ political will on the application of VAT to the international trade in services and intangibles with a view to addressing the risks of double taxation and unintended non-taxation that result from the uncoordinated application of VAT in a cross-border context. They are encouraged to take due account of the Guidelines when designing and implementing VAT legislation. They are in particular encouraged to pursue efforts to implement the principles of VAT neutrality and the principles of destination for determining the place of taxation of cross-border supplies with a view to facilitating a coherent application of national VAT legislation to international trade.


← 1. The terms “value added tax” and “VAT” are used to refer to any national tax by whatever name or acronym it is known such as Goods and Services Tax (GST) that embodies the basic features of a value added tax, i.e. a broad-based tax on final consumption collected from, but in principle not borne by, businesses through a staged collection process, whatever method is used for determining the tax liability (e.g. invoice-credit method or subtraction method).

← 2. These recommended principles and mechanisms were also included in the Final Report on OECD/G20 BEPS Action 1 “Addressing the Tax Challenges of the Digital Economy”. This Report was endorsed by the OECD Council on 1 October and was endorsed by G20 Leaders during their Summit in Antalya on 15-16 November 2015.