"Instant" International Trade and VAT Legilsation

Brought to light because of Google now having to charge VAT to UK customers

[dmorison]

I've posted this as a new topic to get a wider consideration of a potential time-bomb problem for businesses doing international and "Instant" trade on the Internet.

This has come about as a result of new VAT legilsation, to be implemented in the EU as of 1st June 2003. A "plain English" overview can be read here:

[hmce.gov.uk...]

In short:

Businesses outside the EU providing Internet based services to customers INSIDE the EU now have to collect VAT on the value of those services if their customer is not VAT registered with the EU.

That's bad enough for you guys outside the EU as it is, but let's say that this legilsation is copied, or a slightly different version is implemented in countries all over the world.

How then, is your "SIGN-UP NOW" page supposed to work?

You want to do business instantly, you want to take credit card orders immediately from a customer ANYWHERE in the World and provide your service online straight away.

But the potential impact of this is that you will have to consider the VAT requirements of EVERY COUNTRY TO WHICH YOU SELL, and possibily register with the collection authorities in those countries.

That would be unworkable. I think this legilsation by the EU has been put together with complete blindness as to the actual mechanics and speed of providing services on the Internet.

Any thoughts, or have I missed the point?

[2oddSox]

Hi dmorison,

Thanks for the link. Very interesting. Being midnight on a Friday night it's a bit much to absorb, but on first glance there seems to be enough in there to be worried about. It seems to concentrate on 'services' and not 'products', so that's one good thing. It also appeared to be contradictory in that it referred to businesses in the EU that were enjoying the benefits of that service being liable, but then later making no mention of enjoyment of services specifically by businesses, but rather by everyone in general.

Another thought I had is how are they going to enforce that rule unless there are reciprocal agreements tax-wise between the supplier's country and the recipient's in the EU? I know the country that I live in has many such agreements, including many countries in the EU, but I'm not sure that is a general practice for other countries.

I'll read it again with the clarity of a Sat morning :)

2odd...