Virtual VAT

Pro

1 April 2005

Internet shoppers could soon find themselves paying tax on virtual goods downloaded from Websites outside the EU. Under a new regulation being studied by the European Commission, music, software and other virtual goods would be subject to VAT. 

The move closes a loophole and puts EU countries on an equal footing with companies operating outside the EU, who will have to charge the rate where the customer lives. Companies within the EU will charge their home country’s VAT rate.

The proposed regulation does not affect goods that have to be physically distributed, such as CDs and books. 

If the regulation is passed, this may give some European companies a competitive advantage over the US firms. VAT rates in the EU range from 15 percent in Luxembourg to 25 percent in Sweden. 

Objections have already been voiced in the US, where virtual goods are not subject to sales tax. The Bush Administration is said to be seriously concerned at the proposal. 

It is also unclear how the EU proposes to collect the tax, and it could prove to be a complex procedure. The regulation has been approved by the Council of Economic Finance Ministers, but it must also pass a consultation with the European Parliament before it is implemented.

 

Read More:


Back to Top ↑

TechCentral.ie