Feeds

EU mulls closure of Madeira ISP tax loophole

Freeserve, take note

  • alert
  • submit to reddit

The Essential Guide to IT Transformation

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
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
Amazon says Hachette should lower ebook prices, pay authors more
Oh yeah ... and a 30% cut for Amazon to seal the deal
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
Chips are down at Broadcom: Thousands of workers laid off
Cellphone baseband device biz shuttered
Feel free to BONK on the TUBE, says Transport for London
Plus: Almost NOBODY uses pay-by-bonk on buses - Visa
Twitch rich as Google flicks $1bn hitch switch, claims snitch
Gameplay streaming biz and search king refuse to deny fresh gobble rumors
Stick a 4K in them: Super high-res TVs are DONE
4,000 pixels is niche now... Don't say we didn't warn you
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.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Backing up Big Data
Solving backup challenges and “protect everything from everywhere,” as we move into the era of big data management and the adoption of BYOD.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.