AOL Tax Case On Hold Until October

by Robin Pilgrim, LawAndTax-News.com, London

04 March 2003

The Financial Times revealed on Monday that the long-running battle between leading ISPs, Freeserve and AOL over the latter's exemption from VAT in the United Kingdom has ground to a halt.

The business daily reported that the court hearing examining the legitimacy of this exemption has been delayed until October due to the fact that a key witness is on maternity leave.

UK-based Freeserve, owned by France Telecom, has argued that as the result of a 1997 customs ruling which classified America Online (AOL) as an information provider rather than telecommunications provider for the purposes of UK taxation, the US company has secured an unfair competitive edge by saving some £200 million in VAT payments in the United Kingdom.

Whatever the verdict when the court case originally resumes, AOL's VAT free days are numbered, however, as a European directive approved last year covering digital downloads will result in the imposition of VAT on the US-based provider from July of this year.

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