The financial service sector has welcomed an announcement by Brussels to
update the VAT regime for the industry
Problems have arisen as financial services and insurers have been exempt from
VAT. They are not required to charge VAT when providing services, but have to
pay VAT on goods and services acquired for business, which leads to mismatches
and places the institutions at a disadvantage to foreign competition.
The EC yesterday proposed that it would focus on redefining what services are
exempt from VAT, providing the sector the option of taxing services and an
industry-specific VAT exemption on cost-sharing arrangements.
‘The changes will increase clarity, allowing firms to operate and plan more
efficiently. This is especially true of firms with cross border operations who
will be able to pool operations and share costs between group members without
creating additional non-recoverable VAT,’ said Sarah Knight, assistant director
of financial regulation and taxation at the Association of British Insurers.
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The EC has been instructed to draft a European Union (EU) directive authorising an EU financial transaction tax, which would apply to ten of the EU’s 28 member states