Proposals by the European Commission to change the way digitised services supplied over the Internet are taxed to VAT are unlikely to create a level playing field warns an East Anglia VAT expert.
EU VAT Rules for e-commerce are unrealistic
Rob Plumbly, VAT senior manager from professional services firm said: 'Currently digitised services such as downloaded software and music purchased by private individuals, are only liable to VAT if the business is based in the EU.'
The proposals would change the rules so that VAT would not be applied to digitised services provided by EU businesses to purchasers outside the EU, however non-EU resident businesses supplying such services to private customers in the EU would be subject to VAT.
Mr Plumbly continued: 'It is unlikely that we will see these proposals implemented for at least three years. In the meantime non-EU businesses will be able to establish dominant positions in e-commerce and Internet trading.
'Under the proposals non-EU companies would be legally required to register in the EU but it is unclear how this will be enforced. How can a company based in a country on the other side of the world with no assets or other presence in Europe be forced to register in the EU?'
Further changes will stop businesses purchasing services such as a website hosting VAT free from non-EU suppliers. While this is a welcome change for EU businesses supplying such services, there will be a significant wait before the proposals are implemented.
For further information please contact: Claire Campbell at Deloitte & Touche on 01223 259525.
The Deloitte Cambridge office comprises 8 Partners and over 250 staff who deliver a full range of professional services to the East Anglian region. As well as focussing on the life sciences and technology sectors for which the region has become so renowned, the office has long standing specialisms in other sectors including the professions, consumer business, food and agribusiness.