Nature of the services provided by Equinix

VAT information Nature of the services provided by Equinix

The European Court of Justice ('ECJ') ruled that, in principle, a supply which comprises a single service from an economic point of view should not be artificially split to ensure that the functioning of the VAT system is not distorted. According to the ECJ, the essential features of the transaction must be ascertained in order to determine whether the taxable person is supplying the customer with several distinct principal services or with a single service.

A single service is supplied if two or more elements supplied by the taxable person to the customer are so closely linked that they form, objectively, a single, indivisible economic supply, which would be artificial to split.

The services supplied by Equinix are to be regarded as regular data center and colocation services, which in the end consist of all necessary services and supplies (e.g. guaranteed power delivery, consistent temperature control and the ability to directly connect with the IT equipment of other customers in the data center) for customers to create an ideal environment for the exchange of data. Since customers would not just buy the climate control or the security part of the service, the data center services Equinix provided should, from a typical customer's point of view, be regarded as a single service.

Since the data center services Equinix provides consist of multiple elements, the general element of the principal service must be determined to qualify the service and, therefore, the place of taxation of the supply.

The exchange of data is the constitutive element of the service supplied by Equinix. Creating ideal circumstances and conditions for data exchange is the central and indispensable part of the service. The other elements are considered as subordinate to this main element. Taking this into consideration, all elements of the service must be treated as a single supply, and the main element of the service is the exchange of data. This element should be determinative for the VAT treatment.

Therefore, the standard VAT rate in Ireland will apply to this service, consisting of a bundle of elements, including power charges.

If you need any further information regarding how Equinix treats VAT, please feel free to contact our Tax department at VAT@eu.equinix.com.

Elisa Tramontano

Senior Manager, Indirect Tax EMEA, Equinix