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EU Preps ISP VAT Loophole Closure

Posted: 29th Jul, 2003 By: MarkJ
The loophole that has allowed Freeserve to avoid paying the full 17.5% value added tax (V.A.T) in the UK may soon be closed. The European Union is currently mulling over a number of possible solutions:

Last year, for example, UK ISP Freeserve moved its business for its Anytime unmetered ISP service to Madeira to take advantage of the island's 13 per cent VAT rate, as opposed to 17.5 per cent in the UK.

However, the EC believes such moves aren't on and reckons that the lower VAT rate "must be strictly limited to goods and services giving rise to consumption in those territories".

Said the document: "Recent experience has shown that the current derogations can give rise to abuse: for example, there have been cases of businesses in the e-commerce and telecommunications sectors moving to the Azores and Madeira in order to apply the lower rates applicable there to services they supply to final consumers throughout the Community."


This issue first arose after Freeserve complained that AOL UK was being unfairly exempt from paying VAT due to its business being based in the USA. This was later resolved. More @ The Register.
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