TaxPersonal TaxVAT nightmares lurk for dot.coms

VAT nightmares lurk for dot.coms

Dot.com entrepreneurs have been warned they could be facing a large online VAT liability not only in the UK, but across Europe.

The news comes from Big Five firm Ernst & Young in the first report of its new e-business initiative.

‘It is vital for dot.coms, or indeed any company venturing into e-commerce, to have a full understanding of the impact that VAT will have on their business,’ said Graham Gunning, e-commerce expert and VAT partner at E&Y.

‘Multi-country or global trading attracts the interest of numerous tax authorities all hungry to collect what they believe is due to them,’ he said.

E&Y also took the opportunity take a swipe at VAT law, which it sees an unfit and outdated for the new economy.

‘Unfortunately VAT rules are decades behind the modern connected economy, consequently imposing an enormous compliance burden on businesses. They are not designed to take account of the Internet, let alone WAP technology or digital TV,’ the report said.

And Gunning had advice for dot.coms thinking of launching or preparing for an IPO.

‘It is vital for businesses to create automated systems to cope with indirect tax during the planning stage of an IPO or online launch.’

According to E&Y, the principle issues facing dot.coms in the e-commerce retail environment are:

  • The possibility of having to register for VAT in more than one EU member state.
  • The onerous compliance and system requirements that arise from multiple EU VAT registrations.
  • The importance of considering pan-European VAT issues before going online.

Links

E&Y’s Connected Economy website

E&Y tax website

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