The Council of Economics and Finance Ministers adopted
definitively, without discussion, the Directive and a Regulation
based on Commission plans to create a level playing field for the
taxation of digital e-commerce in accordance with principles on the
taxation of e-commerce agreed at a 1998 OECD Ministerial
Conference.
The rules will ensure that when these services are supplied for
consumption within the European Union, they will be subject to EU
VAT, and that when they are supplied for consumption outside the
EU, they will be exempt from VAT. The rules do not apply to sales
to businesses.
The rules will apply, for example, to software sales where the
software is delivered by downloading, rather than by disc. US
companies have complained about the proposal because it means that
they will now be expected to detect EU-based customers and charge
VAT to these sales, something that EU companies have already had to
do. In the US, companies are currently exempt from levying sales
taxes on e-commerce transactions following a decision taken by the
US Government which was intended to encourage e-commerce.
Non-European internet companies selling into the EU will be
required to register for VAT in one Member State. The rate of VAT
paid to that Member State on each transaction will vary according
to the location of the consumer to whom they are selling. The taxes
collected will later be distributed to the country in which the
transaction took place.
European Commissioner for Taxation Frits Bolkestein said
today:
"I welcome the decision of the Council to
adopt these rules on applying VAT to digital products. They will
remove the serious competitive handicap which EU firms currently
face in comparison with non-EU suppliers of digital services both
when exporting to world markets and when selling to European
consumers."
Member States must implement the new measures by 1st July
2003.
