By Sally Watson, 7 June 2000 19:23
NEWS The European Commission today agreed proposals to modifiy the rules governing Value Added Tax (VAT) for electronic services, subscription TV and pay-per-view TV. The proposal will close the loophole that allows companies outside the EU to sell digital goods like software, games and music over the Internet without paying VAT. A statement from the EC said: "The changes modernise the existing VAT rules to accommodate the emerging electronic business environment and to provide a clear and certain regulatory environment for all suppliers, located within or outside the EU." Under the proposed Directive, non-EU companies supplying electronic goods to consumers would have to register for VAT in the EU if they turnover more than E100,000 (£63,000) annually in Europe. Suppliers will be free to choose which country they want to pay VAT in. Companies supplying business-to-business services would remain exempt because business customers pay VAT themselves on a self-assessment basis. According to Gary Burnes, VAT senior manager at PricewaterhouseCoopers, the proposal could have a far-reaching effect on more than consumer games, software and TV. "It also makes an impact on the more serious pursuits like online training, Web casts and distance learning packages - some of the new definitions are quite broad and could catch a whole range of services," he said. Burnes added that most companies would register in countries with a cheaper rate of VAT - like Luxembourg at 15 per cent - which may discourage some member states from accepting the legislation. The proposal now goes to the EU's Council of Ministers for adoption.
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