In future, non-EU companies will supposedly face the same VAT regime as companies based within the EU, with the difference that they will be able to register on-line in any one member state, and then charge VAT to their non-VAT-registered clients at the rate applying in the client's own member state, which will be between 15% and 28% as things stand currently.

Ms Fairpo points out that the new rules may tilt the balance in favour of EU sellers in low-VAT jurisdictions such as Luxembourg and Madeira, who need charge only their local rate of VAT. However, the problem of enforcement will remain for the EU, she says: 'By their nature, digital goods are hard to track and identify. Compliance by non-EU businesses will, largely, be voluntary; although for businesses whose affairs are subject to any form of public scrutiny, compliance will be mandatory if they are to avoid the need to disclose, for example, the potential liability in their accounts. Any business with plans for an IPO will need to ensure that it complies with the regulations if it wishes to avoid awkward questions at the due diligence stage.'

'It will be interesting to see whether this new regime invites retaliatory action from countries outside the EU,' says Ms Fairpo. 'California, for example, already has a history of attempting to enforce its tax laws outside its immediate boundaries. With so much e-commerce being centred within that state, this would seem to be an ideal prompt for it to endeavour to require EU businesses to collect sales tax on sales to local consumers.'

It will also be interesting to see whether non-EU businesses expecting substantial volumes of digital trade choose to create a permanent establishment in a low-tax EU member state, eg again Luxembourg or Madeira, or Ireland, where they would be subject to low rates of corporation tax, and would be able to reclaim VAT paid out on 'inputs' sourced within the EU. It is unclear whether a VAT-registered non-EU trader would have this advantage. Probably not, but even if so, it is a bureaucratic nightmare to achieve the reclaims, even for an established EU trader.

Plenty of business ahead for VAT advisers in the EU!