EU to propose simpler VAT rules to boost e-commerce

November 25, 2016 11:39 AM EST

The European Union flag is seen flying, at the border of Gibraltar with Spain, in the British overseas territory of Gibraltar, historically claimed by Spain, June 27, 2016, after Britain voted to leave the European Union in the EU Brexit referendum. REUTE


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BRUSSELS (Reuters) - The European Commission will propose next week simplified rules on value-added sales tax (VAT) on goods and services traded from one country to another within the European Union to boost e-commerce.

As part of its digital single market strategy, the Commission has made a series of proposals to make parcel delivery more affordable, protect consumers when they buy online and limit "geo-blocking", the practice of barring consumers in one country from buying from a provider in a different country.

An EU official said on Friday that VAT was the "last piece in the puzzle" on e-commerce. The administrative and financial burden of VAT was one of the biggest barriers to cross-border trade, particularly for start-ups and smaller companies.

Currently, online traders have to register for VAT in all the EU countries to which they sell goods, a significant barrier given it can cost about 8,000 euros ($8,482) to comply per country.

For e-services such as mobile phone apps or video content delivered online, sellers have been able since the start of 2015 simply to provide quarterly returns to tax authorities in their own country detailing their cross-border sales and the VAT due.

Under the Commission's plans, this would also extend to goods delivered from one country to another. The move could reduce the administrative burden for companies by 95 percent, for a saving to EU business of 2.3 billion euros.

Separately, the Commission also wants to act against VAT fraud from consignments sent from outside the EU. Currently, they are VAT-exempt if worth below 22 euros. This allows fraud by declarations of artificially low amounts. The Commission said this exemption would go.

Finally, the Commission will propose that digital publications receive the same tax treatment as traditional books and newspapers. Printed material currently can be subject to reduced rates or zero rates of VAT, but electronic equivalents cannot.

The new system will allow, but not oblige, the EU's 28 member states to align VAT rates on e-publications to those of printed equivalents.

(Reporting by Philip Blenkinsop; Editing by Adrian Croft)



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