Eversheds partner and tax expert Giles Salmond has said that countries such as Luxembourg are likely to lose out when EU rules on value-added tax (VAT) on e-commerce transactions come into force in 2015.
He said: ‘The change in VAT rules from 1 January 2015 will affect B2C suppliers of telecoms, e-commerce and broadcasting. Currently, businesses supplying these services to consumers charge VAT where the business is located, which means that some businesses have been able to take advantage of lower VAT rates by locating in certain member states such as Luxembourg. The new rules are designed to ensure that VAT is now payable on these services where the customer is located and where the services are actually consumed.’
Salmond believes that the new rules will make VAT collection fairer for those companies that have chosen not to relocate. However, he also states that there are likely to be new costs associated with the rule change, as administration becomes more complicated.
He said: ‘These changes will potentially increase administrative costs as well as VAT costs, as businesses will have to work out the VAT payable in each EU member state where they have consumers. Businesses supplying these services will either have to register in each individual member state where they have consumers or take advantage of registering in one member state, which will then pass on the VAT payable to the relevant other member states.’