Feeds

EU mulls closure of Madeira ISP tax loophole

Freeserve, take note

  • alert
  • submit to reddit

Providing a secure and efficient Helpdesk

Europe is considering closing a loophole that allows ISPs and e-commerce operations to pay less tax.

In a proposal published last week the European Commission said it wanted to ensure a "level playing field" concerning VAT (Value Added Tax).

One of the proposed reforms highlighted in the document was the "abuse" whereby operators base their businesses in the Azores or Madeira, a move which results in them playing less VAT.

Last year, for example, UK ISP Freeserve moved its business for its Anytime unmetered ISP service to Madeira to take advantage of the island's 13 per cent VAT rate, as opposed to 17.5 per cent in the UK.

However, the EC believes such moves aren't on and reckons that the lower VAT rate "must be strictly limited to goods and services giving rise to consumption in those territories".

Said the document: "Recent experience has shown that the current derogations can give rise to abuse: for example, there have been cases of businesses in the e-commerce and telecommunications sectors moving to the Azores and Madeira in order to apply the lower rates applicable there to services they supply to final consumers throughout the Community.

"Steps must be taken to put a swift end to such practices as they are a misuse of the derogations which were granted solely to allow the Member States concerned to take account of the remoteness and special geographical situation of those regions," it said.

Freeserve - which has fought a long running battle over a loophole that, until recently, meant that AOL UK was exempt from paying VAT - was quick to comment.

Said a spokeswoman: "Lets not forget that Freeserve wouldn't be in Madeira in the first place if it wasn't for the fact one of our competitors was able to take advantage of not just differential VAT rates in the UK but not paying any VAT at all.

"Now that loophole has been closed the EC are looking at Madeira and the Azores but the current situation isn't likely to change for years to come.

"We would suggest that as the market for ecommerce continues to grow, the sensible solution would be to apply a common VAT rate for all online transactions across Europe." ®

Related Story

AOL centralises European ops
Freeserve mulls another Madeira VAT move
Freeserve Anytime moves to Madeira

Providing a secure and efficient Helpdesk

More from The Register

next story
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
Driving with an Apple Watch could land you with a £100 FINE
Bad news for tech-addicted fanbois behind the wheel
Special pleading against mass surveillance won't help anyone
Protecting journalists alone won't protect their sources
Phones 4u website DIES as wounded mobe retailer struggles to stay above water
Founder blames 'ruthless network partners' for implosion
Radio hams can encrypt, in emergencies, says Ofcom
Consultation promises new spectrum and hints at relaxed licence conditions
Big Content Australia just blew a big hole in its credibility
AHEDA's research on average content prices did not expose methodology, so appears less than rigourous
EMC, HP blockbuster 'merger' shocker comes a cropper
Stand down, FTC... you can put your feet up for a bit
Vodafone to buy 140 Phones 4u stores from stricken retailer
887 jobs 'preserved' in the process, says administrator PwC
prev story

Whitepapers

Secure remote control for conventional and virtual desktops
Balancing user privacy and privileged access, in accordance with compliance frameworks and legislation. Evaluating any potential remote control choice.
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Beginner's guide to SSL certificates
De-mystify the technology involved and give you the information you need to make the best decision when considering your online security options.