Offshoring can be defined as relocation of business processes (including production/manufacturing) to a lower cost location, usually overseas.
Offshoring can be seen in the context of either production offshoring or services offshoring. China has emerged as the preferred destination for production offshoring while India has emerged as the dominant player in the services offshoring domain.
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From 1st January 2010 EU businesses will have to account for the reverse charge to VAT on the cost of services provided from offshore locations outside of the EU as a result of the Finance Act 2009.
Under current legislation the place of supply for VAT purposes is deemed to be the country where the supplier is based. If a supplier is based outside of the EU there is no VAT liability.