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Europe's
finance ministers yesterday agreed the proposed measures,
which means that they become EU legislation, shortly to be
published in the Official Journal of the European Union.
The proposal was hammered out in a political agreement on
the issue last December.
VAT
on "telecommunications, broadcasting and electronic
services supplied to consumers "will now be charged
at the rate in the country of the customer, not of the
supplier, as is now the case.
The
fact that the VAT rate of the supplier applied to online
transactions led to firms such as Amazon, Skype and Paypal,
relocating to Luxembourg, which has Europe's lowest VAT
rate.
Luxembourg
had long objected to the changes because it said it would
lose tax revenue.
All
the other changes announced will take effect from 2010,
but the changes to consumer online services will only come
into force in a staged process from 2015 in what is being
widely seen as a concession to Luxembourg.
For
business to consumer services outside of the definition of
"telecommunications, broadcasting and electronic
services", the VAT rate charged will be that of the
supplier's country.
EU
Commissioner for taxation and customs László Kovács
said 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. As a
result, Member States have seen their revenues
eroded," he said.
Luxembourg
has claimed that it will lose €200m a year in revenues
generated by its 15 per cent VAT rate, the lowest in
Europe. Sweden's 25 per cent is the highest rate.
Under
the compromise deal the entire VAT generated by a
transaction will not be sent to the customer's country
until 2019.
The
new laws will also create a system that will automatically
transfer VAT between countries to settle the debts created
by the new agreement. This will replace a paper based
system and will allow companies to claim back VAT from
countries where they are not even registered for the tax.
"I
am particularly proud of the new procedure to allow
businesses to electronically claim VAT refunds from other
Member States in which they are not registered but have
paid VAT," said Kovács." This change from a
paper-based to an electronic system means that refunds for
businesses will be faster and easier.”
Source
: Register - London, England, UK,
dated 14/02/2008
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