Feeds

VAT's all folks: Telecoms and services tax to be set at consumer's homeland rate

EU tries to stop suppliers from cross-border tax shop

Build a business case: developing custom apps

VAT relating to cross-border business-to-consumer transactions will be charged at the rate in the country where the customer is based, rather than that of the supplier, under new EU rules to take effect in 2015.

Explanatory notes on new VAT rules for telecoms, broadcasting and electronic services have been published by the European Commission. The new rules reform VAT on internet-delivered services such as software, ringtones and music and will take effect from 2015.

"This information will help businesses to prepare and to comply with the new tax rules from day one," a statement by the Commission said.

European finance ministers adopted the measures into legislation in 2008, but they will only become effective in 2015. They are designed to stop businesses which offer these services from locating in countries with preferential VAT regimes. The fact that the VAT rate of the supplier has so far applied to online transactions led to many firms such as Amazon, Skype and Paypal, relocating to Luxembourg, which in 2008 had a standard VAT rate of 15 per cent, and still does today. That is equivalent to the EU VAT Directives minimum standard VAT rate and represents the lowest standard VAT rate of all the EU member states.

When the new rules were adopted in 2008, the then EU Commissioner for taxation and customs László Kovács said that the new rules would eradicate inequalities in a system where the competition for business locations was skewed. "This is particularly true of services which can be supplied at a distance where, as a result of current rules, businesses have been locating in countries with lower VAT rates," said Kovács. "As a result, member states have seen their revenues eroded."

The moves were resisted by Luxembourg at the time which said that it would lose €200m a year in VAT revenues. The agreement to make the new rules effective from 2015 was widely seen as a concession to Luxembourg.

The new guide on the 2015 VAT rules focuses on the place of supply implementing measures which apply across all EU member states.

Darren Mellor-Clark of Pinsent Masons, the law firm behind Out-Law.com, said: "The VAT package is an on-going series of measures designed to bring VAT into the 21st century and more closely aligned to the modern economy, embracing digital and other technologies. The complexity of interpreting the VAT legislation and rebuilding enterprise resource planning systems to deal with the changes is a major challenge for multinational businesses. I'm sure that such businesses will be pleased to receive further confirmation and guidance as they implement change."

Copyright © 2014, Out-Law.com

Out-Law.com is part of international law firm Pinsent Masons.

Build a business case: developing custom apps

More from The Register

next story
'Stop dissing Google or quit': OK, I quit, says Code Club co-founder
And now a message from our sponsors: 'STFU or else'
Top beak: UK privacy law may be reconsidered because of social media
Rise of Twitter etc creates 'enormous challenges'
Uber, Lyft and cutting corners: The true face of the Sharing Economy
Casual labour and tired ideas = not really web-tastic
Ex US cybersecurity czar guilty in child sex abuse website case
Health and Human Services IT security chief headed online to share vile images
Don't even THINK about copyright violation, says Indian state
Pre-emptive arrest for pirates in Karnataka
The police are WRONG: Watching YouTube videos is NOT illegal
And our man Corfield is pretty bloody cross about it
Oz biz regulator discovers shared servers in EPIC FACEPALM
'Not aware' that one IP can hold more than one Website
prev story

Whitepapers

Gartner critical capabilities for enterprise endpoint backup
Learn why inSync received the highest overall rating from Druva and is the top choice for the mobile workforce.
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.
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.
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.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.