Futher Delays Ahead Over Decision On VAT Moratorium As EU Waits For New President To Take The Helm

by Ulrika Lomas, Tax-news.com, Brussels

14 June 2001

According to a report from the Accountancy Age news service, the European Union has decided to postpone its decision over imposing VAT on e-commerce in Europe until the presidency change from Sweden to Belgium which is due to take place later this month.

At present European-based companies must charge their domestic rate of VAT on downloadable electronic services sold to unregistered EU customers, but US and other foreign companies charge neither VAT nor sales tax, which enables them to provide cheaper services to customers.

Last month, the United Kingdom opposed the EU's proposal to impose VAT on foreign-originated e-commerce transactions within the EU with such precise timing that it looked as if they had planned to destroy the directive, forcing the EU to go back to the drawing board. In its current form, the proposal requires non-EU businesses selling digital goods to consumers within the EU to charge VAT, just as their EU competitors are. Non-EU businesses would only need to register for VAT in one EU country for all their products and the revenue generated from the registrations would then be redistributed throughout the EU member states under a clearing house system.

But things are still up in the air and nothing can be resolved until the EU moves forward. Accountancy Age says the move to postpone its decision has disappointed many EU-based traders who know that those from outside of the Union will continue to have an advantage over them.

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