Non-EU firms must charge VAT on Web sales from 2003

sceptre

No change for those who buy cheaper tech stuff and get caught by the customs on the way into the country - but the new ruling will affect downloaded services also.

From the Irish Times:

http://www.ireland.com/newspaper/finance/2002/0508/606469729BZEUVAT.html

The European Union has approved rules that will require US and other non-EU firms to levy value-added tax (VAT) on products such as computer games and software they sell on the internet to private customers in the 15-nation bloc.

The new rules, which come into force in July 2003, may irk the United States and add to its ongoing trade row with the EU over US steel imports.

The European Commission said the new regulations were designed to address what the bloc saw as a competitive disadvantage against the United States.

"I welcome the decision of the Council (of ministers) to adopt these rules on applying VAT to digital products," European Commissioner Mr Frits Bolkestein said in a statement yesterday.

"They will remove the serious competitive handicap which EU firms currently face in comparison with non-EU suppliers of digital services both when exporting to world markets and when selling to European consumers."

Under United States rules designed to boost e-commerce, business is not taxed for selling digitally delivered products - items such as children's games, music or other services that are sent electronically to a consumer's home computer.

US-based companies make up a large chunk of firms selling such goods via the internet to private customers.

Thanks to the international nature of the internet, which is not impeded by geographic boundaries, they gain easy access to the EU market.

But from July next year, US and other non-EU companies will have to be registered with a tax authority in one of the 15 member-states and be required to levy that country's VAT rate on all applicable internet transactions.

The member-country will then distribute the taxes collected to other countries, based on where the actual sales are made.

The VAT liability will also cover electronic services that are downloaded or consumed online, as well as subscription-based and pay-per-view radio and TV broadcasting.

EU companies, which already charge VAT on such internet transactions conducted with the bloc's private citizens, will, however, be exempted from VAT for services they provide to non-EU residents.

The US, which threatened in February to take the case to the World Trade Organisation (WTO), believes the rules are discriminatory and will put additional administrative pressure on US companies.

"We continue to be concerned about the potential for discrimination against non-EU companies in terms of the tax rates required to be charged and the administrative and compliance burden," said Ms Tara Bradshaw, a spokeswoman for the US Treasury.

Thorbar

"We continue to be concerned about the potential for discrimination against non-EU companies in terms of the tax rates required to be charged and the administrative and compliance burden," said Ms Tara Bradshaw, a spokeswoman for the US Treasury.

Maybe you should have thought of that before you put tax levies on all non US steel imports.

Lemming

Given the borderless nature of the internet, how the flup do they intend to distinguish between who's not inside the EU and who is (for ordering purposes)???

Also, if these companies don't register with a tax authority, does that mean that the EU will start blocking websites??

Welcome to the Fourth Reich (excuse the reference, but you get the idea).

But I do agree with Thorbar that the US is getting some of its own medicine and doesn't like it.

dahamsta

Given the borderless nature of the internet, how the flup do they intend to distinguish between who's not inside the EU and who is (for ordering purposes)???

Receipts.

Also, if these companies don't register with a tax authority, does that mean that the EU will start blocking websites??

Bit of a jump, isn't it?

Welcome to the Fourth Reich (excuse the reference, but you get the idea).

That was more like a leap.

But I do agree with Thorbar that the US is getting some of its own medicine and doesn't like it.

It's not about "medicine", it's about the unfair advantage they have. There's no way the EU is going to drop taxes on electronically shipped goods - it's too late now anyway - so they have to come up with something to regain competitiveness.

adam

Nietzschean

Given the borderless nature of the internet, how the flup do they intend to distinguish between who's not inside the EU and who is (for ordering purposes)???

Receipts.

could u clear up how that one would work?, like are they going to be sending recepts voluntarly to the EU? i don't thinks so...we will just order online with credit cards and a parcel will arrive...going to be practically impossible to enforce....the only people who would obey it already have places in europe anyway e.g amazon

dahamsta

could u clear up how that one would work?

Did I say it was logical or reasonable?

adam

Victor

Originally posted by Serialkiller
could u clear up how that one would work?, like are they going to be sending recepts voluntarly to the EU? i don't thinks so...we will just order online with credit cards and a parcel will arrive...going to be practically impossible to enforce....the only people who would obey it already have places in europe anyway e.g amazon

Licence documentation? Credit card receipts? and I suspect there are few software companies selling into Europe with *no* offices in Europe .

Nietzschean

Licence documentation? Credit card receipts? and I suspect there are few software companies selling into Europe with *no* offices in Europe .

1. are the EU going to be checking our reciepts for what look like online purchases?...i know this is the most likely avenue on how it could be monitered due to the company being listed with visa/mastercard and that but i would still be of the opinion this will be very hard to implement and control

2. Licence documentation? online content...does anyone even read the licences they get from downloaded software....not half enuf anyway.

i'd still be of the opinion this ain't going to work on the smaller net firms too well and will only hit the bigger ones....but most of them have offices in europe already so its all the one

Victor

Originally posted by Serialkiller
are the EU going to be checking our reciepts for what look like online purchases?

Not necesarily, remember most tax collection is by self-assessment. And it would tbe the Revenue Commissioners, not the EU.