chodges84 - 1:34 pm on Dec 9, 2004 (gmt 0)

As you mention Luxembourg has a reasonably low VAT rate. As Luxembourg are a member of the EU, any other country in the EU only has to pay their tax rate of 15%. If they were based in the UK, then the customers would have to pay 17.5% VAT.

Oddly Google Adwords are set up in the Republic of Ireland. This has a tax rate of 21%, therefore the customers have to pay 21% VAT. This is OK if you are VAT registered as you can claim it back, but if like me, you don't meet the VAT threshold, then you cant claim it back, and it makes your final bill higher than if they were based in the UK, or luxembourg.

Hope that helps.