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Eversheds comment: Change in EU VAT rules could increase business costs

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    On predictions that Luxembourg is likely to lose out when EU rules on value added tax on e-commerce transactions come into force in 2015, Giles Salmond, partner and tax expert at global law firm Eversheds, comments: 

    “The change in VAT rules from 1 Jan 2015 will effect 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. It will make VAT collection fairer for businesses who supply these services, that have not been able to relocate or otherwise take advantage of lower VAT rates.

    “However, 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. Inevitably there will be costs associated with this.”


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