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provides Internet delivered information or services within the EU, this is
a failure to register and account for VAT that could render you or your
company liable to criminal prosecution for tax evasion, money laundering,
false accounting or similar offences.
Activities covered by
the Directive
The Directive applies to
the following activities:
- Radio or television
broadcasting services solely broadcast over the Internet or a similar
electronic network.
- Electronically supplied
services, i.e. Website supply, web-hosting or distance maintenance of
programs and equipment.
- Software and software
updates.
- Electronic images, text,
information or databases.
- Music, films, games and
webcasting of events.
- Distance teaching of an
automated nature.
Whilst the following
activities fall outside of the Directive they create VAT issues:
- Soliciting and/or taking
orders.
- Issuing invoices to
customers.
- Procuring goods and
services.
EU VAT
Registration Obligation
Non-EU vendors must
register for VAT in one of the European Union Member States.
The VAT authorities of the
Member State in which the Non-EU vendor has registered will remit VAT
collected to the states in which sales have been made.
The rate of VAT and rules
relating to VAT vary from state to state. Sample rates of VAT:
- Luxembourg 15%
- Madeira 15%
-
Malta 18%
- UK and the Isle of Man
17.5%
- Sweden 25%
- Denmark 25%
The residential address and
VAT status of every customer would need to be established and recorded and
VAT would need to be applied accordingly. Full records would have to
be maintained for the VAT authorities. This could become impossible to
administer.
The advantages of
establishing a Subsidiary within the EU
An option for Non-EU
vendors lacking an EU subsidiary or a fiscally inconvenient EU subsidiary
is to establish a subsidiary in a Member State where VAT is low or there
exists other fiscal or operational advantages. For instance,
Maltese
companies owned by non-residents can enjoy corporate tax rates as low
as 4%.
The establishment of a subsidiary within the EU circumvents the need to
clarify the location of each customer as local VAT regulations would apply
and the subsidiary would be regarded as a normal EU enterprise.
Setting
up a solution with one of our offices
All our solutions are
provided by EuroConsulta International offices, each of which has
practical experience in implementing solutions for EU VAT and Internet
Delivery.
Malta's e-commerce environment
Our Malta office, supported
by a fully staffed back office operation, operates in an attractive fiscal
regime with a VAT rate of 18%. Malta enjoys high quality Internet
infrastructure provided by the local bandwidth provider Datastream as well
as a separate service by Vodafone. One of the foremost countries in
the field of e-government, Malta is fully geared up for e-commerce and
currently hosts the servers and operations of the worlds largest online
gaming and casino operators, with a significant majority of UK betting
companies relocated to Malta under the new
i-gaming
licence regulations. Microsoft has also set up a significant
base in Malta.
For more info on our VAT planning services
and incorporation of EU VAT registered companies for EU trading, click
here.
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