Luxembourg deal paves way for EU VAT

Luxembourg finally
agreed at the Eurofi
of EU finance ministers in Brussels to a deal which will apply
VAT to services in the country where they are consumed, rather than the location
of the company which sells them, paving the way for sweeping changes to the way
electronic services are taxed.

Luxembourg, which offers one of the lowest VAT permitted under EU
regulations, at 15%, attracting many of the big names in e-commerce such as, Skype and PayPal, would only agree to the deal in return for
postponing the EU VAT until 2015 – five years later than the date proposed by
the EC, the International Herald Tribune reports.

The deal was welcomed by the bigger EU members which expect increases in
revenues. ‘It’s a good deal because it protects £4bn of UK revenues from
telecoms and broadcasting,’ Ed Smith, spokesman for the British government in
Brussels, said. ‘That is more than $8bn.’

Finance ministers also agreed to extend reduced rates of sales tax in five EU
countries for three years. Without a deal, some value-added tax rates in the
Czech Republic, Cyprus, Malta, Poland and Slovenia would have had to rise in
January to the standard rate of 15%.

Further reading:

EU VAT reform risks burdening business

EU to reform financial services VAT regime

Read full story in the
Herald Tribune

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