EC to continue VAT exemption on electronic services


EC to continue VAT exemption on electronic services

Antony Savvas

The European Commission intends extending the timeline for existing value-added tax (VAT) rules covering electronic services.

The extension is proposed to make sure electronic services exported outside of the EU are still exempt from the tax.

The planned extension would operate until 31 December 2008. Rules applied from 2003 made sure electronic services bought for consumption outside the EU were exempt, but these rules are now due to expire.

The rules include TV and radio services, for instance.
Without an extension, the Commission warned previous rules before 2003 would apply, meaning such services would not be exempt.

This would mean that EU providers of such services would have to charge VAT and be at a disadvantage to other providers located outside the EU.

"I urge the EU Council of Ministers to rapidly reach an agreement on this extension. I cannot imagine we would revert to the rules prevailing before the e-commerce directive was introduced," said taxation commissioner Laszlo Kovacs.

Kovacs also wants the electronic services exemption to be made permanent.


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