EU: How to define the location of an ebiz customer?

In today’s article we will take a look at information the EU Commission suggests that should be collected and used to determine the location of the customer – buyer of eservices. We will also analyze the practicability of the various proposed location evidences and think about how easy they are obtained in practice.

As you are probably aware, at least as of 2015 every business supplying eservices to non-VAT registered customers in the EU will have to charge VAT in the country where its customer is located. In a number of cases this rule already applies (e.g. if the eservices are supplied by non-EU companies to EU customers or if they are supplied to Swiss, Norwegian, etc… customers).

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Featured: EU 2015 B2C VAT changes – it’s sooner than you think!

On 1 January 2015 the final phase of the so-called VAT package will come into force and will involve important changes in the VAT treatment of intra-EU business-to-consumer (‘B2C’) supplies in relation to telecommunications, broadcasting and electronic services.

From that moment on, all telecommunications, broadcasting and electronic services provided to non-taxable persons will be taxable at the place where the customer is established, has his permanent address or usually resides. Affected businesses will therefore be required to charge, report and pay local VAT in every Member State in which they have customers, which may result in multiple VAT-registrations throughout the EU.

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EU Commission refers France and Luxembourg to the European Court of Justice over reduced VAT rates on ebooks

As reported, France and Luxembourg have started to apply reduced and super reduced VAT rates to ebooks without obtaining an approval from the rest of EU. This gave them competitive edge over the rest of the EU countries, as companies which were selling ebooks to their EU B2C customers from those two countries could sell them at the lowest available VAT rates (3% for sales from Luxembourg and 5% for sales from France). This (in words of Commissioner Šemeta, responsible for taxation) “runs counter to the fundamental EU principle of fair tax competition.”

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Netherlands: New Decree on the VAT treatment of phone cards and mobile phone contracts

On 6 February 2013, the Dutch State Secretary of Finance published a new Decree regarding the VAT treatment of the sale, distribution and use of phone cards and mobile phone contracts. The Decree entered into force on 7 February 2013, although businesses have until 1 July 2013 to adapt to some of the new rules. The Decree includes a number of substantive changes. Additionally, the Secretary of State provides a number of definitions.

The impact of the Decree is not limited to telecommunications businesses, but also affects agents / distributors and content providers. All these parties may have to change parts of their processes and systems. Find out more

Our ebiz Due Diligence experience: When VAT becomes a material issue

In this article we attempt to explain in a simplified way the impact VAT can have on determining the purchase price of an ebusiness company during a due diligence process. This should be of special interest for investors investing in ebusinesses and also for owners of a start-up when planning to gain additional capital or when playing with the idea of selling their companies some time in the future.

We have explained in previous posts that as of 1.1.2015 all ebusinesses providing eservices to non-VAT registered customers in the EU will have to charge VAT at the rate applicable in the EU country the customer resides in. Find out more

Featured: China – The Great Leap Online

China’s sustained economic expansion over the past three decades has created an entire generation of new consumers. February 2013 issue of PwC’s r&c worlds Express update sheds light on Chinese consumers’ online shopping habits, based on the responses of 900 Chinese shoppers to a recent PwC survey. The Chinese consumers in our survey exhibit unique shopping patterns; for example, shopping far more often and using more on-the-go technology than survey respondents in the West.

The Chinese shoppers are adopting the Internet as a retail channel much faster than their global peers and running ahead of the pack in terms of using new devices and social media. Find out more

Featured: 10 myths of multichannel retailing

This is the sixth consecutive year that PwC has published a study of online shoppers, and our second truly global survey.

Below are some highlights from this year’s report.

  • 59% of respondents follow brands or retailers on social media, compared to 49% last year
  • When it comes to their favorite brands and retailers, 38% of our respondents are following them on social media; up from 33% last year
  • 27% of respondents discovered brands through social media, compared to 17% last year
  • Fully 49% of our survey sample said they use social media every day, an increase of 14% over last year
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EU: 2015 VAT changes to eservices – the “keep it simple” edition

First and the most important fact: These rules are mandatory for any kind of ebusiness, no matter where it is established or has a nexus: in EU, US, China, India, Australia, Switzerland. As soon as a company provides eservices to a non VAT registered EU customer (regardless whether the customer is a legal or a natural person) it is bound by these rules, regardless whether it has a “physical” presence, server or agent in the EU. The customer’s location is the only thing that matters.

We have already presented some of the upcoming VAT changes to eservices (and also telecom and broadcasting services) previously. Find out more

EU: New VAT B2C rules for telecom, broadcasting and eservices might become effective much earlier than 2015 (and other proposed VAT changes)

As reported end of last year, EU Commission has on 18 December 2012 published a new proposal for amending the VAT Implementing Directive 282/2011, which provides additional rules and clarifications regarding the place of supply rules – i.e. defines in which country VAT should be levied.

For the purposes of this post I will limit myself only to those relevant for us telecom, broadcasting and e-services, even though the proposal deals also with some other issues (e.g. work on immovable property).

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