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Countries Agree Common VAT Rules For Digital Services

by Ulrika Lomas,, Brussels

09 November 2015

Representatives from more than 100 countries and jurisdictions have endorsed new OECD International VAT/GST Guidelines, which are intended to establish international standards for the "coherent and efficient" application of value-added tax (VAT)/goods and services tax (GST) to the international trade in services.

The countries endorsed the new guidelines at the OECD Global Forum on VAT on November 5-6, 2015, in Paris. They in particular look to establish a global approach on the taxation of electronic services provided by online retailers to consumers, in new B2C Guidelines.

The Guidelines recommend that foreign sellers register and remit tax on sales of e-books, apps, music, videos, and other digital goods in the jurisdiction where the final consumer is located. The Guidelines also include a recommended mechanism to ensure the effective collection of VAT by tax authorities from foreign sellers.

Commenting on the Guidelines, the OECD's Deputy Secretary-General, Rintaro Tamaki, said: "The effective and consistent implementation of the recommended approaches for collecting the VAT on these digital sales will help jurisdictions to protect their VAT revenues and level the playing field between domestic and foreign suppliers. It is very encouraging to see that a number of jurisdictions have already implemented the rules and the mechanism recommended by these Guidelines, or have expressed their intention to do so. They expect that these reforms will contribute considerable revenues to government budgets."

The decision to draft new OECD Guidelines on VAT responds to growing concern from governments worldwide over the ever-rising volume of cross-border services and online downloads on which no VAT is paid, particularly on products bought by private consumers from e-vendors outside their home jurisdiction. In 2014, B2C e-commerce sales were estimated to exceed USD1.4 trillion, an increase of nearly 20 percent from 2013. B2C sales are estimated to reach USD2.4 trillion by 2018.

The OECD had committed to release the Guidelines in its BEPS Action 1 paper on tackling issues associated with taxing the digital economy, as part of the base erosion and profit shifting project.

TAGS: tax | value added tax (VAT) | commerce | budget | goods and services tax (GST) | internet | e-commerce | standards | retail | trade | services | BEPS

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