Brussels, 12/02/2002 (Agence Europe) - On Tuesday, the ECOFIN Council endorsed a political agreement without discussion on VAT on goods and services sold through e-commerce, like games, films, music, software, the hosting of websites and remote programme maintenance.
The new directive stipulates that suppliers resident in the EU are not subject to VAT when they sell their products outside the Community, in order to ensure EU suppliers remain competitive.
Both EU and non-EU suppliers, however, selling within the single market will be liable to value added tax on both goods and services supplied to intermediaries and to private consumers. Services supplied within the EU from outside the EU to people established in the EU will be liable to tax in the place where the consumer is established. A new system has been set up where suppliers from outside the EU can register for VAT with the tax authorities of any EU country of their choice. The country of registration will then pay the VAT revenue to the country where the consumer resides. A regulation lays down the way administrative cooperation between Member States will operate. Under the compromise agreement signed by the ECOFIN Council on 13 December 2001, this VAT revenue transfer scheme will apply for three years (until 2006), after which the Commission will publish proposals with a view to either extending or amending it.
According to the Commission, these rules for tax to apply in the consumer's country meet the principles laid down by the OECD at its 1998 conference on e-commerce. Despite pressure from the UK (supporting the US' line), most Member States felt that a moratorium on VAT on e-commerce was not a good idea because it put "concrete" suppliers of goods and services at a disadvantage compared with competitors using virtual means, explained the Commission.
Parliament will now be consulted under the codecision procedure and then the text will be formally adopted. The directive will have to be transposed into Member States' law by 1 July 2003.