Feeds

EU mulls closure of Madeira ISP tax loophole

Freeserve, take note

  • alert
  • submit to reddit

Build a business case: developing custom apps

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

Boost IT visibility and business value

More from The Register

next story
Kate Bush: Don't make me HAVE CONTACT with your iPHONE
Can't face sea of wobbling fondle implements. What happened to lighters, eh?
Video of US journalist 'beheading' pulled from social media
Yanked footage featured British-accented attacker and US journo James Foley
Caught red-handed: UK cops, PCSOs, specials behaving badly… on social media
No Mr Fuzz, don't ask a crime victim to be your pal on Facebook
Ballmer leaves Microsoft board to spend more time with his b-balls
From Clippy to Clippers: Hi, I see you're running an NBA team now ...
Online tat bazaar eBay coughs to YET ANOTHER outage
Web-based flea market struck dumb by size and scale of fail
Amazon takes swipe at PayPal, Square with card reader for mobes
Etailer plans to undercut rivals with low transaction fee offer
Assange™: Hey world, I'M STILL HERE, ignore that Snowden guy
Press conference: ME ME ME ME ME ME ME (cont'd pg 94)
Call of Duty daddy considers launching own movie studio
Activision Blizzard might like quality control of a CoD film
US regulators OK sale of IBM's x86 server biz to Lenovo
Now all that remains is for gov't offices to ban the boxes
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 10 endpoint backup mistakes
Avoid the ten endpoint backup mistakes to ensure that your critical corporate data is protected and end user productivity is improved.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Rethinking backup and recovery in the modern data center
Combining intelligence, operational analytics, and automation to enable efficient, data-driven IT organizations using the HP ABR approach.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.