888 Group Sets Cash Aside For Probable German VAT Due

by Ulrika Lomas, Tax-News.com, Brussels

06 September 2017

888 Holdings, which operates online gambling and gaming services across several jurisdictions, has revealed that it is uncertain about its liability to value-added tax prior to the introduction of new place of supply rules for electronically-supplied services in the European Union.

In the company's report for the six months to the end of June 2017, 888 Holdings disclosed that there are "uncertainties as to whether any VAT is due in respect of certain services provided by the Group to customers in Germany prior to 2015."

The report states that: "These uncertainties are in respect of the determination of the place of supply of some or all of the services provided by the Group prior to 2015 and, insofar as the place of supply and the customer's location is determined to be Germany, whether a possible imposition of VAT on relevant services would be lawful. There are also uncertainties surrounding any tax base to be applied and any retrospective period in the event that it is ultimately determined that VAT is due on any relevant services."

Since January 2015, the EU introduced tighter rules to ensure that business-to-consumer (B2C) supplies of broadcasting, telecommunication, and electronic services are taxed in the location of the consumer, under the destination principle. To ensure the correct taxation of these services, EU and non-EU businesses have to determine the status of their customer (as either a taxable or a non-taxable person) and the place where that customer belongs (that is, whether they are based outside the EU, or, if in the EU, in which member state).

The company said that in response to a tax inquiry, it has provided information about services provided prior to 2015 to "enable the appropriate tax authorities to form their own view regarding the likelihood of a VAT liability."

Although the company said it has obtained a "thorough legal assessment" of the tax positions in question, it has decided to err on the side of caution by recording a provision of USD45.3m in respect of some of the services.

For other services the company is of the view that "it has strong arguments to support the fact that the payment of VAT is not probable" because of the significant level of uncertainty related to these services.

888 Holdings has estimated that the VAT payable on these other services is up to USD18.5m, although, based on legal advice, it contends that "no such taxes have been triggered at all." It intends to defend its position on this matter in court if challenged by the tax authorities, it added.

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